Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Mr. Speaker: I remind the House that supplementary questions have been getting longer and reducing the number of questions that can be called.

Oral Answers to Questions — Foreign and Commonwealth Affairs

Hong Kong

Mr. Parry: asked the Lord Privy Seal when he expects the Hong Kong Government to repeal the Public Order Ordinance.

The Minister of State, Foreign and Commonwealth Office (Mr. Peter Blaker): There are no plans to repeal the Public Order Ordinance, but a review has been carried out of certain of its provisions. The Public Order (Amendment) Ordinance 1980 received the assent of the Legislative Council on 4 December and will be brought into operation soon.

Mr. Parry: The Minister will be aware of the arrests under the statute that have taken place in recent years of housewives, school children, worker priests and social workers, and also of the criticism of the Hong Kong trade unions. Does he agree that it is now time to repeal this draconic measure?

Mr. Blaker: I do not think that the hon. Gentleman is right. Hong Kong, just as any other country, including the United Kingdom, requires a statute about public order. In the light of one or two problems that have arisen in the past it is right to look at the existing ordinance and to repeal it where required. The new ordinance narrows the definition of a public meeting, narrows the definition of a public procession and changes the arrangements whereby one had to apply for permission in advance to hold a public meeting. That provision has been replaced by one that arranges for notice to be given of the intention to hold a procession. I think that the House will agree that that is an improvement.

Mr. Canavan: Until such time as the Public Order Ordinance is repealed, will the Minister tell the Hong Kong Government to stop infiltrating and keeping secret files on organisations that are suspected of being subversive, especially when the list of suspects includes such innocuous bodies as the Education Action Group, the Heritage Society and the Hong Kong Christian Industrial Committee?

Mr. Blaker: I have no information to confirm what the hon. Gentleman alleges.

Cambodia

Mr. Newens: asked the Lord Privy Seal whether any new initiatives will be taken at the United Nations by Western nations on the representation of Kampuchea in the United Nations.

Mr. Blaker: The question of representation of Cambodia is unlikely to arise at the United Nations until the next General Assembly. We are not aware of any plans for an initiative by a Western country at present.

Mr. Newens: How can the hon. Gentleman defend the failure of the British Government to oppose the representation of the Pol Pot regime in the United Nations, when they have withdrawn recognition from that regime and when they accept that it was responsible for millions of deaths and for the mass suffering of ordinary people? Surely, that is an example of the Government's hyprocrisy in the conduct of foreign affairs?

Mr. Blaker: As the hon. Gentleman knows, we withdrew recognition from the Pol Pot regime over a year ago. But, as we said at the time, there is no necessary connection between that withdrawal of recognition and the vote at the United Nations.

Mr. Newens: Disgraceful.

Mr. Blaker: We cast that vote in company with 72 other countries holding similar views, and it was carried by a substantial majority. We continue to abhor the Pol Pot regime. We do not believe that the vote that took place at the United Nations will help that regime to come back to power, nor do we wish that to happen.

Information Services (North America)

Mr. Biggs-Davison: asked the Lord Privy Seal whether he will make a statement about British information services in North America.

Mr. Blaker: We give the highest priority to ensuring that North American leaders and public opinion are correctly informed of the facts about the United Kingdom and the Government's policies. At this moment I am confident that our information services will ensure that Congress and the people of the United States are made aware of the joy and relief of this House and of the British people that the American hostages have at last arrived safe and sound in the West after their terrible ordeal.

Mr. Biggs-Davison: Is my hon. Friend aware that I appreciated the quality of the British information services when my hon. Friend the Member for Peterborough (Dr. Mawhinney) and I put our Ulster case before Irish America? Is he aware also that I welcome the decision not to let that case go by default across the Atlantic? Is he satisfied that the services have sufficient resources? Why was it thought necessary to downgrade the New York post in favour of Washington?

Mr. Blaker: I agree with my hon. Friend about the importance of presenting to the United States people the true facts about Northern Ireland, and I congratulate him on the success of his recent tour. The numbers employed by the British information servicces in the United States have been reduced to some extent since 1977. However, we regard the organisation as effective. A total of 81 officers in 13 posts in the United States and Canada are engaged in information work. My hon. Friend asked about


the change in staffing in New York. The head of the services in New York has been moved to Washington because we believe that it is right that he should be in close contact with the ambassador and because Washington has become an increasingly important centre for news. A senior officer is still in charge in New York.

Mr. J. Enoch Powell: Would it not be more effective than constantly chasing deliberate misrepresentations about Northern Ireland if we were to emphasise and document to the American public the overwhelming debt, both quantitative and qualitative, which that country, in its build-up, owes to Ulster?

Mr. Blaker: That is certainly a point that we can consider. The information given to the American people and Congress by our information services covers a wide range of subjects relevant to Northern Ireland. Perhaps that is a topic that we could add.

Dr. Mawhinney: Is my hon. Friend aware that my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison) and I were most impressed by the officers of the information services in New York and Boston? Is he aware that American journalists to whom we spoke were concerned that by downgrading the senior post in the New York office, which is what has happened in the media centre of the United States, the British Government were giving less support to the information services than previously?

Mr. Blaker: I am grateful for that tribute to the British information services in the United States. We are not downgrading the importance of the activities in New York. The head of the services has been moved to Washington for the reason that I have given. A senior officer will still be in charge in New York and the numbers in New York will not otherwise be reduced.

Mr. McNamara: Have the British information services in North America put out a statement deploring the help given by the American Government to the Right-wing junta in E1 Salvador and its murderous campaign against the people there?

Mr. Blaker: I cannot answer that question without notice.

Gibraltar

Mr. McQuarrie: asked the Lord Privy Seal if he has had any discussions with member States of the European Economic Community on the restrictions imposed by the Spanish Government at the border between Spain and Gibraltar.

The Lord Privy Seal (Sir Ian Gilmour): The Governments of Community countries are kept informed of developments and of our views.

Mr. McQuarrie: I thank my right hon. Friend for that reply. Does he agree that as the Gibraltarians are United Kingdom nationals under the Treaty of Rome restrictions on the border should be clarified before there is any question of the accession of Spain to the Community?

Sir Ian Gilmour: I agree with my hon. Friend. As he knows, the Lisbon agreement reached last April has not been implemented, but we hope that it will be implemented long before Spain joins the Community.

Mr. Denzil Davies: Does the Lord Privy Seal agree that the failure of the Spanish Government to abide by the Lisbon agreement is unacceptable? Should not the Foreign Office use the opportunity of negotiation with the Spanish Government on the EEC to persuade the Spaniards that they must keep the promises made at Lisbon?

Sir Ian Gilmour: Of course we hope that the Lisbon agreement will be implemented before long. We certainly hope that it will be implemented long before the EEC negotiations are completed.

Sir John Langford-Holt: Will my right hon. Friend be specific? Are we to understand that so long as the restrictions are imposed by the Spanish Government the British Government will feel compelled to object to and resist the accession of Spain to the EEC?

Sir Ian Gilmour: On many occasions I have said that the idea of two countries in the EEC with a closęd border is unthinkable. I am sure that it will not come to that.

Namibia

Mr Cyril D. Townsend: asked the Lord Privy Seal if he will make a statement on the future of Namibia.

Mr. Dobson: asked the Lord Privy Seal if he will make a statement on Namibia.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Richard Luce): Her Majesty's Government are deeply disappointed by the failure to achieve agreement on a date for a ceasefire in March leading to independence for Namibia by the end of 1981. It proved impossible at the Geneva meeting to reach agreement in view of the statement of the delegation led by the South African Administrator General that it was "premature" to agree on an implementation date. This is an especially regrettable setback after the great efforts of the United Nations, the Western Five and the front-line States to meet the reasonable concerns of South Africa and the internal parties. We support the chairman's closing appeal to those concerned to reconsider their position. The Five will review the position with the other participants in the negotiations and we shall discuss the problem with the new American Administration. Meanwhile, the progress made so far in preparing the ground for a settlement should not be thrown away.

Mr. Townsend: Does my hon. Friend appreciate that many hon. Members on both sides of the House are grateful to him and his officials for their sterling efforts in attempting to achieve a satisfactory conclusion at Geneva? Is he aware that the resulting failure at Geneva has encouraged the Soviet Union to continue to support Cuban forces in Angola?

Mr. Luce: I am grateful to my hon. Friend for his first remark. I believe that any failure to reach an agreement is a setback for the people of Namibia and for all the surrounding States, including South Africa, and for the West. The only people who stand to gain from discontent and violence are the Soviet Union and its satellites.

Mr. Dobson: What pressures are the British Government bringing to bear on the South African Government, particularly in view of their general soft approach to South Africa, epitomised by the Prime Minister's statement that her desire is to bring South Africa in out of the cold?

Mr. Luce: The British Government have been working closely with the four Western Powers to persuade all the parties to compromise and reach an agreement. We should not underestimate the progress made over, admittedly, a long time. We should not underestimate the extent to which the gap was closed—until last week's setback.

Mr. Amery: Is my hon. Friend aware that although, of course, there is disappointment at the failure to reach agreement, there would have been a great deal more disappointment among many if an agreement had been reached that led to a SWAPO Government taking over Namibia? Does he agree that the South African Government have made their position clear, namely, that they will not accept United Nations' sponsored elections until the impartiality of the United Nations has been established over a prolonged period? Does he accept that to suggest anything else is, to say the least, misleading?

Mr. Luce: I am sure that my right hon. Friend shares our objective of stability in Southern Africa. I am sure, too, that he believes, as the Government do, that one of the best ways to achieve stability is by free and fair elections and that it is not for us but for the people of Namibia to choose their Government. That is the best way to achieve stability in that part of the world.
My right hon. Friend asked about United Nations supervision of the elections. He is right. There has been genuine anxiety on the part of the internal parties and of the South African Government about whether the United Nations would supervise free and fair elections. One of the main objectives of last week's conference was to see whether there could be common ground with a view to reassuring the parties that the United Nations would be genuinely impartial. I believe that Mr. Urquhart has made a series of proposals which should be considered seriously and reflected upon by all the parties as a gesture in that direction.

Mr. Healey: I offer my support to the hon. Gentleman, as he is supporting a bipartisan policy on Namibia. In answer to his right hon. Friend the Member for Brighton, Pavilion (Mr. Amery), does he agree that responsibility for this tragic breakdown rests unequivocally with the Government of South Africa, who clearly went to Geneva intending to wreck the conference and in bad faith, and that the SWAPO organisation, on the contrary, showed great flexibility and moderation in seeking to relieve the United Nations of its responsibility for recognising SWAPO as the only representative of the peope of Namibia?
Can the hon. Gentleman assure the House that when the Prime Minister and the Foreign Secretary go to see President Reagan they will make it clear to him that the credibility of the West in Africa is now at stake and that it is essential that the five Western Powers should continue to stand shoulder to shoulder with the front-line States in finding a solution to this problem along lines that have already been agreed in principle by all concerned?

Mr. Luce: If the right hon. Gentleman does not regard it as too patronising coming from me, may I first congratulate him on his new position?
I come to South Africa and the role that she has played. Looking back on last week—as the right hon. Gentleman may know, I was able to attend the second half of the conference—I can say that it was the Administrator

General himself who said that he felt that it would be premature to reach an agreement at that stage, and therefore it was the South Africans' decision not to go ahead. Looking back over several months, or even several years, of negotiations, however, I think that the right hon. Gentleman will agree that it has required compromise from all the parties, and that it would not be right to cast the blame on one party solely. But with regard to last week, the position is plain.
I should have thought that it would be only sensible, and that the right hon. Gentleman would agree, to say that the new United States Administration must have time to consider the situation in Southern Africa. I noticed that the new Secretary of State, in his evidence to the Senate, said that he wanted negotiations, a negotiated settlement and stability in Southern Africa.

Mr. Jim Spicer: Given that we shall almost certainly see an increase in terrorism against the Ovambo people by SWAPO guerrilla forces, can my hon. Friend give us any indication of the support role played by the Cuban, Russian and East German forces in Angola in helping those SWAPO forces to train for such attacks?

Mr. Luce: As my hon. Friend, who knows that area very well, will know, the Soviet Union and her satellites will always seek opportunities where they are available. The evidence is that a large number of Cuban troops, indeed thousands, are present in Angola. I believe that until we get a settlement that situation may well persist.

Mr. Russell Johnston: Is the Minister aware that the constructive approach that he adopts in these matters would be strengthened if he responded more robustly to his right hon. Friend the Member for Brighton, Pavilion (Mr. Amery)? I should be very concerned indeed if the Government shared the right hon. Gentleman's objectives in these matters. Can the Minister say what the next stage is with regard to the five Western Powers sitting down together to consider what initiative they can next take?

Mr. Luce: I believe that my right hon. Friend and I would both like to see stability in Southern Africa and would not like to see the Soviet Union and its satellites exploiting the situation there. However, we may have some disagreement on how we can best achieve that. I think that it is perfectly reasonable that we should debate this in the open.
With regard to the next stage, Mr. Brian Urquhart, who was the chairman of the conference last week, and who commanded the respect of all the parties, said that he felt that there was now a need for a period of reflection by all the parties. The new American Administration will also clearly need time to reflect. We shall certainly be ready to do what we can to help.

Falkland Islands

Mr. William Shelton: asked the Lord Privy Seal whether he has received the views of the Falkland Islanders on the various alternatives that were placed before them recently; and whether he will make a statement.

Sir Ian Gilmour: At a meeting on 7 January the Falkland Islands Legislative Council passed the following motion:
While this House does not like any of the ideas put forward by Mr. Ridley for a possible settlement of the sovereignty dispute


with Argentina, it agrees that Her Majesty's Government should hold further talks with the Argentines, at which this House should be represented and at which the British delegation should seek an agreement to freeze the dispute over sovereignty for a specified period of time.
This motion represents the outcome of debate in the islands since the visit by my hon. Friend the Minister of State in November last year. We are now considering the next steps.

Mr. Shelton: I thank my right hon. Friend for that answer, but in this new situation the probability is that no solution will be reached for some considerable time. If that is so, what plans has he to aid the Falkland Islands? Does he agree that if no such aid is forthcoming the situation might be resolved in Argentina's favour by the continuing economic problems at present facing the islanders?

Sir Ian Gilmour: With respect to my hon. Friend, I do not altogether accept the premise of his question. I do not think that it is necessarily true that nothing will happen for a long time. Apart from anything else, the Argentines have been pressing for developments. I therefore think that it is premature to answer substantively my hon. Friend's question about aid, although he knows that we are committed to supporting the Falkland Islands in every practicable way.

Mr. James Johnson: What plans do the Government have for the future of the islands? Are the people there—fewer than 2,000—to be condemned, like Muhammed's coffin, to be suspended between Heaven and Hell?

Sir Ian Gilmour: The whole point of our talks with the Argentines is to provide a secure future for the Falkland Islanders.

Mr. Nicholas Winterton: Will my right hon. Friend give an assurance that without the wholehearted support of the people of the Falkland Islands there will be no sell-out to Argentina? Does he agree that there is great potential in the Falkland Islands—possible oil and great fishing reserves? Will he consider aiding the Falkland Islands financially in regard to communications, particularly with the extension of their airport? If that were done, there would be no problem at all in dealing with Argentina.

Sir Ian Gilmour: We have many times made it clear that the interests of the Falkland Islanders are paramount, so there can be no question of a sell-out. As my hon. Friend knows, extension of the airport will be very expensive, I have nothing to add to the answer that my hon. Friend the Minister of State gave.

Mr. Maclennan: In the light of the resolution passed by the Falkland Islanders, will the Government withdraw the proposed lease-back suggestion from the agenda for any discussions that they may have with the Argentine Government?

Sir Ian Gilmour: It is not on the agenda at the moment, so it does not have to be withdrawn. All that we shall be discussing for the moment is the freeze.

Madrid Conference

Mr. Chapman: asked the Lord Privy Seal if he will make a statement on the Madrid conference to review the Helsinki agreements.

Mr. David Atkinson: asked the Lord Privy Seal if he will make a statement on the Helsinki review conference taking place in Madrid.

Mr. Hooley: asked the Lord Privy Seal if he will make a statement on the progress of the CSCE discussion in Madrid.

Mr. Blaker: During the first part of the Madrid meeting there was a thorough and frank review of the implementation of the Helsinki Final Act by all signatory States. Among the issues to which particular attention was paid were the Soviet invasion of Afghanistan, the repression of monitoring groups in the USSR and the deteriorating Soviet record on human rights. The Madrid meeting reconvenes on 27 January to discuss new proposals for improving the implementation of the final act, and to draft a final document.

Mr. Chapman: I am grateful to my hon. Friend for that considered reply, but will he confirm that after the six-week session adjourned for Christmas, the senior United Kingdom representative at that conference was quoted as saying, with the greatest regret, that not the slightest step forward had been taken? If the USSR refuses to abide by the Helsinki declaration, which I understand includes a commitment to convene a further review conference in two years' time, will Her Majesty's Government seek a united response from Western countries, including EEC countries, which will not necessarily exclude using certain trade and economic measures?

Mr. Blaker: We are already taking certain trade and economic measures vis-à-vis the Soviet Union in the context of the invasion of Afghanistan. I think that my hon. Friend has correctly quoted Mr. Wilberforce, who was at that time leading the British delegation. It is true that the Russian altitude, although it has not been very acrimonious, has not been very constructive about the prospects of the USSR fulfilling the agreement more effectively. We have already put forward new proposals, which will be discussed on the resumption of the conference on 27 January, and we hope that the Russians will show a more constructive attitude then.

Mr. Atkinson: I congratulate my hon. Friend on his fine speech at Madrid and the firm stand that has enabled the Soviet Union and its allies to be held to account for their continued abuse of human rights. Will my hon. Friend pursue an agreement within the Helsinki process for the prevention of the abuse of psychiatry for political purposes?

Mr. Blaker: I am grateful to my hon. Friend for his first remarks. The proposals that we have put forward, with our friends, include proposals on the better observance of human rights, and I have no doubt that the very important question of the abuse of psychiatry will come up.

Mr. Hooley: Now that the Government have renewed negotiations with the Soviet Union for extended trade credits, does that mean that the process of détente and the CSCE will be continued? If so, will the Government take seriously the proposals tabled by France and the Soviet Union for a European disarmament conference?

Mr. Blaker: I am not sure that we have proposed that credits in favour of the Soviet Union from the Government should be renewed. As the hon. Gentleman knows, we


discontinued them when the Labour Government's agreement expired. We have taken the view that the Soviet invasion of Afghanistan delivered a serious blow to detente, and if the Soviet Union continued to behave in that manner detente could not survive. The proposals by France and the Soviet Union for a conference on disarmament are different. We have supported the French proposal, which envisages the improvement of confidence-building measures over the whole of Europe. We shall examine the Soviet proposals, but they seem to us at present to involve declaratory statements rather than practical steps.

Sir Bernard Braine: Why are the discussions taking place at all when so many brave souls, such as the distinguished Czech playwright, Vaclav Havel, and many others, are being persecuted and are in prison for accusing their Governments of not observing both the letter and the spirit of the Helsinki accord? What protests are we making in Madrid about the treatment of such people, who have committed no crime but are merely witnesses to the truth?

Mr. Nicholas Winterton: Absolutely nothing.

Mr. Blaker: The Government take the view that the Helsinki process inaugurated by the Helsinki Final Act is a useful one in the interests of the West. The evolution of events in Eastern Europe since then shows some confirmation of that. It is true that terrible abuses of human rights continue, but the continuation of the Helsinki process gives us the opportunity to draw attention to those abuses in a public manner. We have been doing that at Madrid, and we have received many letters of congratulation on the stand that the Government have taken. We should continue to draw attention to this matter when the conference resumes.

Mr. McNally: Will the Minister confirm that that statement is very different from the posture of the Conservative Party at the time of the Helsinki Final Act; that the Madrid conference allowed him to raise matters of human rights, and has provided the opportunity for the Prime Minister's U-turn on trade; that his Department's policy follows Lord Trevelyan's dictum that we should continue the dialogue with the Soviet Union at all opportunities, on all issues and at all times; and that the Foreign Office has finally abandoned the cold war posturing of the Prime Minister?

Mr. Blaker: I am sorry that the hon. Gentleman, who is normally fairly sensible, seems to have gone off the rails, especially towards the end of that question. There has been no U-turn on trade. What we said after the invasion of Afghanistan was that trade that was in the interests both of the United Kingdom and of the Soviet Union should continue, in spite of Afghanistan, but that we would support the measures that the United States Government were taking in relation to grain, that we would tighten the rules about the export of high technology to the Soviet Union, and that we would not renew the credit arrangements that the Labour Government made in favour of the Soviet Union.

Viscount Cranborne: I congratulate my hon. Friend on his sterling performance in Madrid. Does he consider that perhaps one of the most effective ways in which to help the cause of human rights in Russia would be to increase Government expenditure on the overseas services provided by the BBC? There is considerable evidence of

the effectiveness of those services, as a function not only of defence, but of helping the cause of human rights, as my hon. Friend will see when he reads the recent reports, particularly in the Financial Times, to the effect that the Russians spend a large part of their resources every year on trying to jam those broadcasts.

Mr. Blaker: I am grateful to my hon. Friend for his opening remarks. I agree with him about the importance of the overseas services of the BBC. We considered that in view of the need to cut public expenditure the BBC external services could not be entirely exempt from cuts, but we are spending a good deal more on them than was being spent two years ago. It is our intention to do the same next year. That will mean an improvement in the reception of those services in general.

Mr. Frank Allaun: At Madrid, will the Government take the initiative over arms reduction? Will they respond to the proposals made by Mr. Brezhnev last month, or will they continue to dance the eternal minuet, in which each side retreats as the other side advances an offer?

Mr. Blaker: The Helsinki forums have not so far been the forums in which we have discussed arms reduction. We have discussed confidence-building measures, and I think it right that we should continue to do that when the conference resumes. Whether at a subsequent stage we should go on to the question of arms reduction is an entirely different and important matter. We must bear in mind that there are many other forums in which arms control and arms reductions are being discussed.

Palestine Liberation Organisation

Dr M. S. Miller: asked the Lord Privy Seal what recent discussions he has had with the Palestine Liberation Organisation.

The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): Ministers have not had discussions with the PLO. Sir John Graham, a deputy under-secretary in the Foreign and Commonwealth Office, met Yasser Arafat on 2 December in Beirut during a routine and fully authorized tour of the Middle East in order to hear at first hand the PLO's views and to explain our own.

Dr. Miller: Did the hon. Gentleman make it clear to Sir John that the British Government could not expect much progress to be made in such talks unless and until the PLO renounced its oft-repeated intention to try to eliminate the State of Israel?

Mr. Hurd: There are two basic facts. One is that the PLO enjoys a lot of support on the West Bank and in Gaza. Secondly, as the hon. Gentleman indicated, it will have to move a considerable distance in accepting the existence and right to security of Israel before there can be a peace settlement. That seems to us a good reason for having additional contacts with it.

Mr. Donald Stewart: Does the Minister accept that the idea of constant consultation will be welcome to many hon. Members on both sides of the House, and that no final settlement is possible without the inclusion of the PLO in whatever agreement is arrived at?

Mr. Hurd: I agree with the right hon. Gentleman that the PLO will need to be associated in one way or another


with discussions before there can be a durable settlement. That was the position taken by the Heads of Government of the Nine at Venice.

Mr. Walters: Does my hon. Friend agree that there cannot be a lasting peace in the Middle East without the recognition of Palestinian as well as of Israeli rights? The PLO represents the great majority of Palestinian opinion. Therefore, is it not sensible and obvious that talks with the PLO should be speeded up?

Mr. Hurd: My hon. Friend is really paraphrasing the two main principles of the Venice declaration. The Council of Ministers of the EEC yesterday gave the Dutch Foreign Minister a mandate to continue discussions based on those principles and on the analysis just put forward by my hon. Friend.

Mr. Healey: Will the Minister accept that one great obstacle to negotiations over the Palestinian problem might be removed in July when a new Government take office in Israel, a Government who reject Mr. Begin's claim to the so-called biblical lands, and that it is desirable that the other great obstacle to negotiations should be removed by the PLO's renouncing its commitment to the annihilation of the State of Israel?

Mr. Hurd: I have said that we see a need for the PLO to move a considerable distance. The right hon. Gentleman would not want the Government to take sides in Israeli politics. We pay attention to the views of all Israeli leaders.

Mr. Farr: Will my hon. Friend confirm that while the aims of the PLO remain unchanged, there is a far greater readiness now to achieve them by negotiation rather than by force?

Mr. Hurd: There have been negotiations, mainly in private conversations, to that effect. What is now needed is for the PLO to move some distance in public, and for the Israelis, in their turn, to accept that it will not be possible to settle the future of the West Bank and Gaza without the participation of the Palestinians.

Oral Answers to Questions — European Community

Foreign Affairs Council

Mr. Spearing: asked the Lord Privy Seal when he intends to make a statement concerning the matters discussed at the European Economic Community Foreign Affairs Council held on 19 and 20 January.

Sir Ian Gilmour: The member States agreed to the appointment of Mr. Poul Dalsager to take the place of the late Mr. Gundelach.
The Council approved a flat rate increase of 1,030 Belgian francs per month for officials in Brussels and Luxembourg, which is 3·3 per cent. for the lowest paid, and much less for senior staff. It also agreed to decide on the new method for reviewing staff pay by 15 April.
Ministers discussed arrangements for trade in baby beef between Greece and Yugoslavia, following Greece's accession to the Community; and also a draft regulation for the Community's programme of aid to non-associated developing countries.
I am circulating a fuller account of yesterday's Council in the Official Report.

Mr. Spearing: Will the Lord Privy Seal tell the House whether the British budget package was discussed? Can he go further than his written answer of 19 December, which says that the return package is to be distributed among a number of sewage works, telephone exchanges and bypasses throughout Britain? Does that package have to be approved by the Council, and when will the full programme be announced to the House and to the people of Britain?

Sir Ian Gilmour: No, it was not discussed because things are moving satisfactorily at present. As the hon. Gentleman knows, we received the first advance of nearly £100 million last year, and the programmes that have been put forward by the Government are being considered. We expect to receive 80 per cent. of our refund under article 235 by the end of the financial year, and 75 per cent. by refund under the financial mechanism.

Mr. Renton: Bearing in mind that there appear to be increasing tensions between the Polish Government and leaders of the Solidarity union, did the Council discuss yesterday what further measures the EEC might take to ease some of the immediate economic difficulties of the Polish people?

Sir Ian Gilmour: I do not think that it did so yesterday, but, as my hon. Friend knows, there were discussions at the previous Council, and there have been discussions in between council meetings, whereby the programme of food aid to Poland was agreed. We have probably agreed—depending on how it is spent—on the sum of £15 million, and there have been other discussions about further aid to Poland.

Mr. Moyle: Will the Lord Privy Seal tell the House whether the opportunity was taken to discuss the supply of arms to Iraq and Iran, since one of the Tehran Government's reasons for releasing the hostages was the hope that it might stimulate tha flow of arms and spare parts? Will the Government take every opportunity to persuade our EEC colleagues not to supply arms to either country in the present situation?

Sir Ian Gilmour: The right hon. Gentleman will have seen the communiqué that was issued after the meeting on political co-operation, which referred to the hostages, but not to arms sales.

Following is the statement:
My right hon. and noble Friend represented the United Kingdom on 20 January at this first meeting of the Foreign Affairs Council under the Netherlands Presidency.
The member States agreed to the appointment of Mr. Poul Dalsager to take the place of the late Mr. Gundelach.
The Council accepted a Presidency compromise proposal awarding staff in Brussels and Luxembourg a flat rate increase of 1,030 Belgian francs per month from 1 July 1980. This is based on a 3·3 per cent. increase for staff on the lowest salary point, and so represents much less for more senior staff: it is a considerable reduction from the Commission proposal for an overall increase of 3·3 per cent.
It was also agreed that the Council should discuss the method for reviewing staff pay on 17 February, and that it should reach decisions on the revision of the method by 15 April.
The Council agreed on an autonomous regime for Greek imports of baby beef from Yugoslavia, to run for three months while a permanent protocol adapting the provisions of the European Commission—Yugoslavia Agreement to take account of Greece's accession to the Community is negotiated.
The Council once again discussed a draft regulation to govern the Community's programme of aid to non-associated


developing countries, but no conclusions were reached. This programme has grown rapidly, from £12 million in 1976 to £95 million this year, and a proper regulation is overdue.

Foreign Policy

Mr. Hicks: asked the Lord Privy Seal what initiatives he proposes taking to achieve closer co-operation with his European colleagues in foreign policy; and if he will make a statement.

Sir Ian Gilmour: My right hon. and noble Friend has made a number of suggestions for the strengthening of foreign policy co-operation. I refer my hon. Friend to his speech at the Ubersee club in Hamburg on 17 November, a copy of which has been placed in the Library of the House.

Mr. Hicks: In the context of the European initiative for the Middle East, is it not a fact that any possible solution will have to involve a settlement of the questions of Palestinian refugees and the occupied territiries? Is it not therefore sensible and logical for the European countries to recognise the PLO as the legitimate spokesman for the Palestinians, as has already been done by more than 100 countries?

Sir Ian Gilmour: As my hon. Friend will have heard, my hon. Friend the Minister of State has just been dealing with questions of that sort. The Government recognise only States. We do not recognise organisations such as the PLO. However, we made it clear in the Venice declaration and since that we strongly believe that the PLO cannot be excluded from the peace process.

Mr. Healey: Is the Lord Privy Seal aware that his reply to my right hon. Friend the Member for Lewisham, East (Mr. Moyle) was rather like saying that yesterday was Tuesday and the communiquésaid nothing about Wednesday? Will he answer the question that was put to him, particularly now that the hostages have been released? Will he assure the House that the Government will use their influence inside the Community to ensure that no Community countries supply arms to the combatants in Iran and Iraq until a lasting peace is established?

Sir Ian Gilmour: I cannot speak for Community countries, but I can speak for us. There have been no sales to Iran, including the Kharg, since November 1979, and all sales will remain subject to customary licensing procedures. Future applications will be considered in the light of all the relevant circumstances, including the situation in the area that relates to war and our relations with Iran.

Mr. Eldon Griffiths: Will my right hon. Friend be discussing with the European countries the removal of sanctions against Iran by all member countries? Before trade can be resumed, will he discuss with them the need for the return of the British citizens who are being held illegally in Iran? Does he agree that it is in the common interest of Europe and the West as a whole that our future relations with Iran should prevent that great and important country from slipping either into chaos or under the Iron Curtain?

Sir Ian Gilmour: I am sure that the whole House will agree with the concluding words of my hon. Friend. He will appreciate that sanctions were imposed in the context

of the American hostages, and will be lifted immediately. Of course, like my hon. Friend, the Government attach the greatest importance to the release of the four British people who are detained in Iran. We hope that that will take place soon.

Mr. Russell Johnston: Does the Lord Privy Seal agree that closer political co-operation would be facilitated if there were an effective permanent secretariat attached to the Council of Ministers? Are the Government still pressing that case, and if so, what response have they had to it?

Sir Ian Gilmour: The hon. Gentleman knows that my right hon. and noble Friend has put forward that suggestion on one or two occasions, notably in his Hamburg speech. We think that it would improve political co-operation. There are different views about it in the Community, and a general view has not yet been formed.

Mr. Peter Fraser: Even though, as my right hon. Friend said, it has now been agreed with our European partners that the sanctions that were imposed last year by this House and by other countries should be lifted, will he assure the House that not only this country, but other countries, too, will pay the greatest regard to the export of military hardware to Iran unless and until we get our four prisoners home?

Sir Ian Gilmour: That is not particularly relevant to the release—[HON. MEMBERS: "Why not?"] There is a clear distinction between the position of our detainees and that of the American hostages. The common factor is that neither group should have been detained in the first place. Apart from that, the Americans have been engaged in a long bargain with the Iranians to get back their hostages. We do not believe that there should be a bargain. We believe that the detainees should be released forthwith.

Community Policies

Mr. Marlow: asked the Lord Privy Seal what progress he expects to make in the next six months in achieving fundamental and substantial reforms in the European Economic Community.

Sir Ian Gilmour: Under the agreement reached on 30 May 1980 the Commission is due to submit the results of its examination of Community policies, aimed at preventing the recurrence of unacceptable situations, by the end of June 1981, and the Council of Ministers will no doubt have a preliminary discussion on this shortly after it is submitted. Meanwhile, we are having informal contacts with the Commission and with our Community partners.

Mr. Marlow: Since the British housewife is forced to pay about £ 1,500 million each year over and above the cost of supporting our own agriculture, and since, according to The Times, New Zealand could increase its agricultural production and produce goods at prices that would be half of those ruling under the CAP, without a single penny of capital expenditure, will my right hon. Friend take whatever measures are necessary to ensure that Britain can go back to a system whereby we can get food at world market prices, to the considerable benefit of the poor, the elderly and the disadvantaged in the country?

Sir Ian Gilmour: I do not accept my hon. Friend's figures. As he realises, he is asking us to leave the Community. It is much better to say so than to put forward a demand that cannot conceivably be granted.

Mr. Denzil Davies: When the Government consider these matters, will they look at the absurd arrangement whereby agricultural prices are fixed in green currencies and not in real money? Does the Foreign Office realise that the British consumer is paying not only an import tax on food imported from outside the EEC, such as New Zealand butter, but a 13½per cent. tax on food imported from the EEC? When will the Government revalue the green pound?

Sir Ian Gilmour: The right hon. Gentleman talks about the absurd system. While he was at the Treasury he did nothing to change it. Under his Government the green pound went down to 45 per cent. less than its value, with great damage to our farmers. At the moment the positive MCAs that we have add about 2·25 per cent. to the food index and less than 0·5 per cent. to the whole retail price index.

Mr. Dorrell: Will my right hon. Friend confirm that this country had a trade surplus with Europe last year and that, whatever negotiations he undertakes to reform the shortcomings of the Community, he will not endanger the substantial benefits that this country gains from membership of the Community?

Sir Ian Gilmour: I agree with my hon. Friend. It is also the case, as I have several times emphasised to the House, that our performance in manufacturing, which has not been good all over the world, has been relatively better in our trade with the EEC than it has with the rest of the world.

Mr. Arthur Lewis: As the Government are alleged to be united in making cuts in Government expenditure, will the right hon. Gentleman tell us what has been the extent of the cut in our EEC expenditure to date, and what cut he envisages in the future? Will he accept that this is a cut that the House and the country would like to see? People want that expenditure to be cut drastically.

Sir Ian Gilmour: I do not know where the hon. Gentleman has been over the past nine months, but it was announced on 30 May that we had succeeded in cutting our contribution both this year and next by two-thirds respectively about £700 million and £800 million.

Foreign Affairs Council

Mr. Dormand: asked the Lord Privy Seal where he expects to meet his European Economic Community counterparts to discuss the future development of the Community.

Miss Richardson: asked the Lord Privy Seal what items Her Majesty's Government are seeking to have placed on the agenda of the next meeting of the European Economic Community Foreign Ministers.

Mr. Cryer: asked the Lord Privy Seal when he next expects to meet other European Economic Community Ministers to discuss harmonisation of European Economic Community affairs.

Sir Ian Gilmour: I next expect to meet my Community colleagues at the Foreign Affairs Council on 16 and 17 February. It is too early to say what topics will be discussed.

Mr. Dormand: When the right hon. Gentleman meets his counterparts, will he impress upon them the disenchantment of the British people with the political control imposed upon us by the Treaty of Rome? I make no mention of the disastrous economic consequences of our membership of the EEC, about which questions have been asked this afternoon. Will the right hon. Gentleman begin to move towards a fundamental change of the Treaty of Rome, so that we can have a much looser federation with Europe?

Sir Ian Gilmour: We do not have a federation, either tight or loose, with Europe, and we are not aiming to have one. I do not know where the hon. Gentleman gets the word from. The EEC is a collection of nation States. We have accepted no greater controls on us than either France or Germany have accepted. Does the hon. Gentleman really think that France and Germany behave as if they have lost national control over their destiny? Of course they do not, and nor do we.

Mr. Cryer: Is not harmonisation a none too subtle erosion of the powers of any United Kingdom Government? If, for example, a future Government wanted to take measures to reduce the level of unemloyment, would they be seriously inhibited or stopped by measures taken at Brussels under the Treaty of Rome? When one gets down to it, is not the only answer to follow Labour's policy and get out of the Market?

Sir Ian Gilmour: No, because, first, harmonisation is not an erosion of sovereignty. In some cases it is sensible, and in others it is not, but it has nothing to do with sovereignty. Secondly, Governments are not inhibited by the EEC in general in taking steps to reduce unemloyment. Thirdly, if we left the EEC it would have a catastrophic effect on jobs.

Mr. Moate: Does my right hon. Friend agree that one of the objectives of the Treaty of Rome is the free movement of labour? In view of the imminent or actual enlargement of the Community to include Greece, the very welcome possible inclusion of Spain and Portugal, and in view of the current agreement with Turkey, does he agree that this is an objective that should be re-examined, in the best interests of all the members of the Community, to avoid the possibility of damage being done to any member of the Community in years to come?

Sir Ian Gilmour: I do not think that that is right. As my hon. Friend will appreciate, there are transitional arrangements with Greece, so that there will be no full movement until, I think, 1988. No doubt similar arrangements or provisions will be made in the Treaty of Accession for Spain and Portugal.

Mr. Robert Hughes: Has the Lord Privy Seal kept his EEC counterparts advised of the part that the Government have been playing in trying to seek a settlement in Namibia? Will he confirm that, in the discussions before the Geneva conference, the South Africans accepted the principles for the agenda, and that the failure to sign an agreement is a massive breach of faith? Will he, therefore,


discuss with his European counterparts ways in which United Nations mandatory sanctions can be applied to South Africa?

Sir Ian Gilmour: The answer to the hon. Gentleman's second question must be "No". It must be sensible to have a breathing space while the Reagan Administration consider their policies on Southern Africa.
We had a quite extended discussion about Namibia—the hon. Gentleman probably was not present—and I do not think that there is anything that I can usefully add.

Mr. Dykes: Does my right hon. Friend agree that the right kind of harmonisation for us to emphasise in the coming years is that which enables all countries and all industries, including British industries, to do more trade in the other member States? I am thinking here of the financial industries of Britain. Will the Government press, for instance, for better terms for harmonisation in the insurance industry?

Sir Ian Gilmour: I agree with my hon. Friend. Insurance is a good case in point and, as he knows, we are particularly interested in it.

Mr. Denzil Davies: Does the Lord Privy Seal agree that a Common Market of 12 members, including Spain, Greece, and Portugal, will be very different in character from the original Common Market of six members set up in the 1950s? Is there not now a case to repeal the Treaty of Rome, which is ever irrelevant and inflexible, and replace it with a much looser economic arrangement that takes fully into account the differing problems and needs of the different countries of Western Europe?

Sir Ian Gilmour: No, I do not think so. I accept that a Community of 12 members is almost certain to be very different from a Community of six members. To suggest that we should repeal the Treaty of Rome is, if I may say so, frivolous. It would be an enormous undertaking and contrary to this country's national interests and those of the Community. We have no intention of doing so.

Japan

Mr. Hal Miller: asked the Lord Privy Seal what discussion there has been amongst Foreign Ministers of the European Economic Community on Community relations with Japan.

Sir Ian Gilmour: The Community's relations with Japan were most recently discussed by the Council of Ministers on 25 November 1980. The Council adopted a declaration calling for a wide-ranging dialogue between the European Community and Japan, but making it clear that in order to promote such a dialogue there should first be effective moderation in Japanese exports and a clear commitment by the Japanese Government to a substantial and early increase in imports of Community products.

Mr. Miller: In view of the importance of our trading relationships with Japan, will my right hon. Friend report to the house on the outcome of the dialogue recently held by Sir Roy Denman under that directive? Will he ensure that if the process of that dialogue was perhaps not as harmonious as it might have been, care is taken on future occasions so that we do not lose valuable ground?

Sir Ian Gilmour: We do not want to lose any valuable ground. My hon. Friend will appreciate that I should not

comment or report on particular meetings between officials of the Community and other countries. We hope that the Japanese will reply fairly soon to what was said in the autumn, and we look forward to a satisfactory dialogue with them.

Mr. Douglas: Will the Lord Privy Seal assure the House that the Community will act as a community in relation to Japan, and that Japan will not pick off individual nation States? Will the Community hold a concerted policy on microelectronics and on energy in particular?

Sir Ian Gilmour: That will be discussed. I agree that when the Community acts as a community it has greater strength. However, I have already made it clear that Britain could not accept any arrangements that were less effective than those already in our possession.

Oral Answers to Questions — National and Local Government

Officers Association

Mr. Keith Wickenden: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the secondary effects of NALGO's industrial action against the London borough of Wandsworth".
The facts are simple. As hon. Members know, there is a dispute between members of the National and Local Government Officers Association and the London borough of Wandsworth. The facts of the dispute are not known to me and are not relevant to this application. The dispute is partly political, because members of NALGO take exception to certain public expenditure cuts that the borough has put into effect.
I am concerned about the secondary effect of that dispute, namely, that many sub-contractors are no longer being paid and have not been paid for many months. As a result, a major contractor in my constituency, which employs many painters and decorators, will have to lay off men this Friday because it has no money to pay them.
Whatever the merits of the dispute may be, members of NALGO did not intend to cause financial hardship or stress to other trade union members. I believe that this matter should have consideration.

Mr. Speaker: The hon. Member for Dorking (Mr. Wickenden) gave me notice this morning before 12 o'clock that he might seek to move the Adjournment of the House under Standing Order No. 9 for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the secondary effects of NALGO's industrial action against the London borough of Wandsworth".
I listened, as the House listened, with concern to what the hon. Gentleman said. I realise that it is a matter of considerable importance to his constituency and to the workers involved. However, as the House knows, under the revised Standing Order No. 9 I am directed to take account of the several factors set out in the Order but to give no reason for my decision.
I have given careful consideration to all the representations that have been made, but I must rule that the hon. Gentleman's submission does not fall within the provisions of the revised Standing Order and, therefore, I cannot submit his application to the House.

Orders of the Day — SUPPLY

[5TH ALLOTTED DAY]—considered

Orders of the Day — Energy Policy

Mr. Speaker: I must inform the House that I have selected the amendment in the name of the Prime Minister. A considerable number of hon. Members from both sides of the House have indicated that they hope to participate in the debate. I hope that those who are fortunate enough to be called to speak will bear that in mind.

Mr. Merlyn Rees: I beg to move,
That this House deplores Her Majesty's Government's lack of overall energy policy; condemns the pricing policy which handicaps the competitiveness of British industry, and rejects a policy for coal which would lead to a reduction in the output projected in the 'Plan for Coal'.
We have divided the motion into three parts. We are concerned about overall energy policy, pricing policy for industry and the "Plan for Coal." Our energy position is the one bright light in the economic firmament during a world depression that has been accompanied by a domestic economic policy that only exacerbates the position. The House does not pay enough consistent attention to energy. Every year a Budget Statement is made, from which legislation flows. There is discussion on the Government's economic policy, and such discussion spreads throughout the country. In our view, there should be an annual energy statement that should lead to debate and discussion. In addition, the Select Committee on Energy should be brought into that discussion.
I am a new Front Bench Spokesman on this subject, and during the past month I have looked back in the records. In the past, the Government have—typically—issued written answers when they have wished to put on the record key decisions on energy policy. I hope that that will not be the case in future. Just before Christmas a written answer was issued on the gas-gathering pipeline. If my hon. Friend the Member for Dunfermline (Mr. Douglas) had not used his initiative and raised this matter during the Christmas Adjournment debates it would not have been discussed. It is of vital importance to the country.
Similarly, a written answer was given on the postponement of the BNOC Clyde field. Such important matters should not be slipped in. There is room for more consistent discussion on energy policy. As a new spokesman, I have considered the Energy Commission, its work and its demise. Whatever form it may take, and whatever name it may be given, there is room for a forum in which those involved in the industry can discuss Government policy and become involved in its formulation. There is wide interest in the House on this subject, and many hon. Members have practical experience of it. No Government should think that they know best, particularly on energy policy.
We must find ways of bringing into the discussion those involved in the various energy industries. I am against bureaucracy, wherever it may exist. I have no wish—as

seems to have been argued—to set up a bureaucratic pimple on the body politic. Nevertheless, open discussion of this subject is vital.
We all know that not only is there a need for a general acceptance of policy; in addition, there must be a flexibility of approach. As a result of the long leads in investment, decisions taken in a short-term situation will almost certainly prove to be wrong in two or three years' time. Changes are constantly taking place.
I should like this debate to be forward-looking. About 30 years ago I studied the report of the first commission on the coal industry in 1871. That was 110 years ago. Some of the most eminent men in the coal industry were members of that commission. The commission said:
Every hypothesis must be speculative,"—
that shows good sense—
but it is certain that if the present rate of increase in the consumption of coal be indefinitely continued, even in an approximate degree, the progress towards the exhaustion of our coal will be very rapid.
Professor Jevons, a very eminent economist at that time, was one of the leading proponents of the market approach to economics. He put the case even more firmly in the report. He said that coal supplies would run out within 110 years. Exactly 110 years later, we know that he was wrong.
The commission's report raised another interesting point. It argued that much of the coal that we had could never be mined. It said that it knew of coal-bearing strata in North America that was almost untouched and that was about 70 times the area of our own strata. The commission speculated that in time we would import our coal from North America.
The report went on to say—this is very revealing:
it may well be doubted whether the manufacturing supremacy of this kingdom can be maintained after the importation of coal has become a necessity".
I want to return to the question of the importation of coal. The report was wrong. Wrong decisions were taken in the 1950s and the 1960s by both Labour and Conservative Governments. We on the Opposition side, know that wrong decisions on the coal industry were taken at that time. What we have to endeavour to do, in an uncertain field, where things that look right in the short term are shown to be wrong in the medium and long term, is to get it as right as possible but to be flexible, so that we can make changes when our belief of a year or six months before is proved wrong.
One other change in recent years concerns the international dimension of energy. There are international effects from the discovery and development of oil in the Middle East. There are international decisions. There is the International Energy Agency. I have read the long report that came out of a ministerial meeting on 9 December, when fundamental decisions were taken. All that we were given in the House was a written answer on 16 December. The situation demanded a full statement to the House. I ask the Secretary of State to make sure that in future the quarterly meetings of the IEA—its decisions and what happened—should be reported in exactly the same manner as meetings in the EEC are reported to the House. If it is good enough to report what happens in agricultural arguments in the Community, since energy is of far greater importance hon. Members should be given a report.
I have listed some of the issues that were decided. I hope that "decided" is the right word. One of these was


that there should be an extension of oil-sharing agreements. What does that mean in practice? Another was that there should be further restraint on oil consumption. What does that mean in practice? The report referred to lines of action—the word "action" was used—on energy switching. An important report was received on coal, with the Ministers recommitting themselves to a doubling of production by 1990. That dealt with a number of countries. In terms of the Opposition motion, it surely means a commitment to the "Plan for Coal", started seven years ago.
What does acceptance mean if it is not translated into action? I shall return to the coal aspect, but there are other important matters connected with energy policy which no doubt will be raised. I give notice that, in any event, the Opposition will return to them in the future and as soon as possible. I touch briefly on one of these subjects.
The question of oil revenues is, in general, a matter for the Treasury, but one aspect falls directly on to the desk of the Secretary of State. The oil revenues now coming into the Exchequer accounts give the United Kingdom more economic hope than anything else. They are the basic cause of the rise in the value of the pound which has other implications. What is the truth on the oil revenues? What is the truth, so far as one can get at it, about the output of oil?
The official projections of future Government revenues from North Sea oil are substantially lower than the projections of independent forecasters. The Treasury forecast puts the figure for 1983, at 1980 prices, at up to £2·4 billion. Wood Mackenzie gives £4·8 billion; Phillips and Drew, £6·2 billion; and the National Institute of Economic and Social Research, £7·8 billion. The right hon. Gentleman should give some justification, if not today, at some time, of the output figures on which the Treasury carries out its political arithmetic. There should be a justification from the Department of Energy to the House to explain why this has been done in a certain fashion.
Following the report in the Financial Times last Friday that the Department is reassessing the reserves, the House should know those who are carrying out the reassessment. Will a part be played by the BNOC? The figures on which the revenues are based are of the greatest importance. Far be it from me necessarily to agree with what is written in the New Statesman. Its view was that the figures were deliberately being underestimated so that they could be updated at a suitable political date. I am concerned only with the practicalities. We must know the basis on which this operation is conducted.
We shall also need to consider the problems of consumers—particularly the lower income groups—and the termination of supplies in difficult economic circumstances. This is a personal matter. I represent a working-class area of Leeds. I know the problems that face people moving into new developments. It is not a matter of world-shattering importance compared with the public sector borrowing requirement, oil revenues, and the "Plan for Coal", but it is a matter to which hon. Members should apply their minds. It is a significant issue for a small but important proportion of the people.
I should like to refer to nuclear power. I am not clear—although I accept that these are early days—about the progress made on the setting up of the public inquiry

into the pressurised water reactor. What form will it take? When will it start? I am aware of the great emotions that are quite properly engendered by this subject. Until we have the inquiry, until we are given the terms of reference, until we are told the date, and until people are able to gather the evidence to put to the inquiry, the emotion will remain pure emotion. There will not be the chance to translate it into proper discussion of the use of nuclear power.
Following the priorities stated in the Opposition motion, I turn to the two main subjects under the general heading of energy. The first is industrial energy prices. As the CBI has stated, there is no doubt that concern has been mounting in recent years over the rate of increase in United Kingdom energy prices. There is even greater concern that our energy prices are higher than those enjoyed by our major international competitors. High energy costs can seriously threaten the viability of certain sectors of industry. The Under-Secretary of State for Energy—the hon. Member for Kingston upon Thames (Mr. Lamont)—made a speech at Manchester on 14 January. He said, in effect, that high energy prices act as an inducement to energy conservation and even more. His words were:
Over the last five years, it has become a cliché to refer to the fact that we are living in a world of high energy prices. There can be no expectation of a return to the days of cheap and plentiful fuel.

Mr. John H. Osborn: Quite right.

Mr. Rees: That is a statement of fact that only those who shout "Quite right" can ever have queried. The Under-Secretary of State went on to say:
High energy prices will mean that a quite different climate for investment decisions will develop, once the first signs of business confidence are restored. Consumers across all market sectors may then feel"—
not now—
the necessity to invest in new energy efficient equipment—new assets, new processes. Those who jump first into this market could make a killing.
The CBI's view, not necessarily referring to the hon. Gentleman's speech, was that conservation requires substantial investment, often showing returns over a relatively long period of time, and will not be enhanced by a high price energy policy at a time of tight squeeze on profit margins.
I have an abiding interest. My father was a collier, as was my grandfather and my great-grandfather. My family has been involved in energy for many years. I have studied the history of this matter. It is always the same thing. At the bottom of a slump it is not profitable to do what is right in the long term; when it comes to the long term, everyone wants to do it but then the signs are that one should not do it.
There are major problems in some industries—paper and board, chemicals and steel, for example—arising out of the high price of energy. That is another statement of fact. The Government have a view. They have put it to the National Economic Development Office. What is it? Is it that most parts of British industry are not generally disadvantaged by fuel prices as compared with European competition? Will the Government be prepared to look at this matter again? I am thinking about flexibility. What is right one year may be wrong the next year. Will the Government be prepared to look at the financial targets for the fuel and power industries and take steps to alleviate the burden?
Is it the case, as reported in The Economist—in very inelegant words—that the Department is cooking up a concession on gas prices and that there is to be a new sort of gas tariff, half-way between prices for firm supplies and the cheaper rate of supplies that can be shut off?
On all of this matter, will the Secretary of State make available the paper that was sent to the NEDO? It so happens that I have a copy of it. Heaven only knows how I got it. In my previous job, no doubt it would have been a matter of great concern, but now I am free from my former trammels, and it is marvellous. I suppose that I have a copy that I should not have had. I do not know what my Government did about it, but if the Government's policy or view on this matter is freely available outside, why should not Opposition Members have a copy? I accept that at the beginning of a discussion we should move on the basis that the Government know what they are doing and that they may be right. My predilection may be the other way. Nevertheless, let us have a sight of this paper.
I can have no complaint about using the NEDO as a sort of Energy Commission. That is what the Government are doing. They have now put people all together in a good corporate State way. They will all sit down and produce a paper in March. I congratulate the Government on doing this. But all the papers available to the NEDO should be available to this House, because we want to participate in the discussion as well.
In any event, there should be speedy action. It is our view that there should at least be an alleviation of energy prices to intensive users—for example, as I have just said, steel, paper and board, and foundries. Perhaps some of my hon. Friends have other suggestions.

Mr. Dick Douglas: Specific.

Mr. Rees: Specific.

Mr. David Winnick: I appreciate my right hon. Friend's remarks about the effect of high energy prices on industry. Many of us are receiving letters on that subject. However, does my right hon. Friend agree that it is also essential to have some kind of comprehensive scheme that would assist those on low incomes, and that the scheme that the present Government have introduced is totally inadequate?

Mr. Rees: My hon. Friend does not normally miss things. I said that about 10 minutes ago. I agree with what he said.
On many matters affecting the coal industry, apart from Blue Books, White Papers, Red Books, and so on, there are aspects that we in politics consider for other reasons. I am very worried about the coal industry, because grave mistakes may be about to be made.
We expressed concern about the coal industry legislation last June. Our motion then asked for increasing national support. It said that the NCB was
under severe financial pressure to accelerate pit closures, putting at risk the planned indigenous coal output targets which are a vital part of the national energy policy of self-sufficiency".—[Official Report, 17 June 1980; Vol. 986, c. 1387.]
In his winding-up speech in that debate the Minister gave a positive reply. Indeed, the key of what he, said was "Let us be positive. Let us look to the future." Those were his words—the same words as were in the Labour Party's manifesto some years ago. They are good phrases—"Look to the future; let us not look back."Apparently my hon.

Friends who work or have worked in the industry and who represent colliers were people who were looking to the past. They were reflecting the views of the people in the industry. We must look to the future, but unless we have a base on which we can move to the future, the worries and niggles, some of which have been put to me recently, will vitiate what we want to do.
What is the present situation? Has it changed since last year? In The Times on Monday there were words that came, I think, from a well-known, important member of the National Union of Mineworkers. I think that The Times was reporting his view, but it matters not, because I am putting the matter generally. The article talked of plans for widespread colliery closures. It said that 25,000 coal miners were to be put out of work.
Is this "rubbish"? I picked up the word that the Secretary of State used at the beginning of his speech in June. On some aspects of this kind he said that reports were rubbish. It is important, because people are believing this. Are the current reports rubbish?

Mr. Gwilym Roberts: My right hon. Friend mentioned the lag in investment, in the sense that what one sows today in the coal industry one reaps in 15 years' time. Does he agree that there are serious fears in the mining communities on the question of mine closures and on the Government's restrictive financial policies, which are destroying the seedcorn of the development of our coal industry for the future?

Mr. Rees: My hon. Friend has the Park colliery in his constituency. He is airing his constituents' views. One of the benefits of debate is that if there is nonsense, if what I have reported is nonsense—if it is "rubbish", to use the word from a previous debate—this is the place where we want the information that removes feelings of that kind.
What is the Government's present view on "Plan for Coal"? It is a most remarkable story. As a result of investment, there are the most remarkable colliery outputs. The Other day my hon. Friend the Member for Penistone (Mr. McKay) took me down a colliery in the Wakefield constituency—the Royston drift mine. It gets world records. The stuff is spewing up out of that drift mine. On the very same day I heard the Prime Minister, on a women's programme, saying how dreadful the nationalised industries were, and that they ought to run themselves like Marks and Spencer and United Biscuits. I did not see much sign of biscuits in what I saw. It is a different field—a different set-up. It is not the distribution trade; it is the productive industry of Britain. It is a remarkable story.
The Under-Secretary has always stuck to the "Plan for Coal". Because of that, in the few visits that I have made so far his role in this matter has been applauded. The congratulations that have come to the coal industry came from the chairman of the NCB at the NUM conference last year. Our congratulations ought to go to the NUM and the NCB on what they have done on the basis of the "Plan for Coal". In all those suburban political meetings at which attacking the nationalised industries is good stuff, I hope that we shall hear that the coal industry has served this country well after 20 years of being regarded as a declining industry. It has more work to do.

Mr. T. H. H. Skeet: The right hon. Gentleman is talking about "Plan for Coal". Is he serious


in his view that by 1985 we could have a producive capacity of 135 million tonnes when we have not got a market?

Mr. Rees: That is exactly what I am asking the Minister. That is exactly the point. We should work towards that. The hon. Gentleman is very interested in oil.

Mr. Skeet: And in coal.

Mr. Rees: I am interested in coal and oil. I also want both of them, and I want the coal industry to play a major part in the years to come. The hon. Member said, in effect, that "Plan for Coal" is a lot of old rubbish. Do the Government think that? Have they changed their mind since last June, when they said that "Plan for Coal" was what they stuck by? The hon. Member thinks that they have not done so. I shall be interested in what the Government say, because it is the Government who have the responsibility. Oppositions can do no more than nudge.
It is the "Plan for Coal" that matters. Any abandonment of the figures will have major implications in other ways and will lead to colliery closures outside the "Plan for Coal". Coal miners do not object to the closures of pits. Why is the hon. Member for Bedford (Mr. Skeet) laughing? Colliers do not object to the closures of pits; they know that their life span ends. What they want are new pits and the expansion of existing pits.
The figures that are given show that whenever there are pit closures, for good geological reasons, they concentrate in certain areas. It is the duty of the House to consider wider matters than just the coal industry itself.
"Plan for Coal" matters in particular areas—for example, South Wales. I will not go into that subject at length, because there is a debate on Wales tomorrow. I am sure that that matter will be raised then. The tripartite sub-committee in Wales envisaged a reduction of uneconomic pits over a five-year period and recognised that that could be done only with help. In South Wales there has been a productivity increase of 5 per cent. Now it is faced with falling markets, with coal imports, and a falling demand for electricity. In that part of the country, in particular, feeling is strong and concern is strong. We may ask the people to look to the future, but in Wales they have a long memory, because they have seen it all before. They do not want it to happen again in exactly the same way.
The time has come for a Government statement on that matter to remove the worries. In a remarkable speech, the Under-Secretary put forward a positive statement on behalf of "Plan for Coal". I echo that. What we and the coal mining industry want to know is whether that positive statement, firmly made by the Government in June last year on the "Plan for Coal" is still the case. If it is, it will make an enormous difference to the worries expressed in the coal mining areas.

Mr. George Grant: My right hon. Friend referred to pit closures. There is already evidence that in certain areas the National Coal Board is restricting recruitment because at the moment mounting stocks on the ground stand at just under 38 million tonnes.
The youngsters coming into the industry for recruitment and training are the seedcorn for the future. It is ridiculous that recruitment has been stopped in the coal industry, yet last year we imported 7½ million tons of coal.

Mr. Rees: I agree about importation. I know also from practical experience that if one removes a young man from the immediate prospect of going into the coal industry—God willing, the economy will pick up—there is no going back once that line has been broken. It is a family line; entering mining is the thing to do. The suggestion does not come from careers officers as it does for other industries, although the careers officers play a part in guiding the people into the industry.

Mr. Geoffrey Johnson Smith: I follow the right hon. Gentleman's argument, particularly in response to the genuine question of human concern put by his hon. Friend. However, we are in a dilemma. Does the right hon. Gentleman suggest that the Government should encourage the production of coal to put in ever-increasing reserves and stocks when there is no possibility of a market?

Mr. Rees: That argument has been put before. Fifteen years ago, a Labour Minister of Power complained that coal stocks were so high that if one put them in Trafalgar Square they would cover Nelson's column, but three years later we were short of coal. Coal should be stored, unless the Government are saying that the market will never come back; that it has gone for ever. Then we would understand. However, the Government have committed themselves to "Plan for Coal".

Mr. Nick Budgen: Will the right hon. Gentleman expand on what he said about the importation of coal? Is he saying that the Labour Party would bring forward legislation to prevent the importation of coal? If that is so, what competitive pressures would remain upon the NCB to produce coal at a proper price?

Mr. Rees: It is possible, for people to rip coal from the surface 13,000 miles away and pay low rates for transportation because we are at the bottom of a recession, but that is a temporary situation. If the hon. Gentleman is arguing, like Professor Jevons 110 years ago, that we will import a great deal of coal for a long period, that is a different matter.
When there are 38,000 million tonnes of coal on the surface—6 million tonnes in South Wales—which has been dug on the money that has been well invested, let us use that and not bring it from other parts of the world. There is no competitive effect. That is not the way in which the coal industry works. I am against the importation of coal. Legislation is not needed to stop it.
In Venice the Prime Minister signed a statement that said that we would need to double the output of coal in Western countries. At the IEA meeting the Secretary of State said much the same thing. I labour this point because it is of such great importance. Otherwise, precipitate action will be taken. We wish to know whether the Government say one thing internationally and act in a different way nationally.
The Government should help with coal stocks; they should help with investment for conversion to coal; they should recall tripartite meetings and bring those concerned together. They should do for our coal industry what West Germany does for its coal industry. West Germany is held up to us as the economic schoolmaster of Europe, as the Dutch were in the 17th century. If the West Germans have


much to tell us, let us follow that advice and carry out their policy, because it would be better for this country in the long run.

Mr. Frank Haynes: On the question of productivity, we are told by the Prime Minister that if we want to increase our earnings we should increase our productivity. The coal mining industry has done just that. It has put more money in the workers' pockets, but if the Government carry out the pit closures policy referred to in the national press, which we want to know more about, it means that the workers will be increasing their productivity and increasing the earnings in their pockets to put themselves out of work. The Secretary of State and the Government must come clean on that matter.

Mr. Rees: My hon. Friend has succinctly expressed what I have been saying for the last half hour. I fully agree with him. His last request to the Government is the one that I have been making.
I understand that one of the considerations in the discussions of the NEDO task force on energy pricing—I do not say that it necessarily comes from the Government—is that the heavy fuel oil tax should be removed. That may be the right thing to do, but it goes against the general statements about spreading oil consumption over a longer period. I ask the Government to take into account the effect that this would have on the coal industry. I have been told that it would reduce the coal burn by over 2 million tonnes and that it could remove 5 million tonnes of prospective coal burn. I do not hold to those figures; I simply say that they must be taken into account.
That is necessary for one other purpose. The coal industry, with its long gestation period of investment, will need something in return to protect it, because coal will be of the gravest and greatest importance in 20 years' time for gas supplies and, possibly, liquefaction.
I say one last personal thing to the Prime Minister—I mean, to the Secretary of State: no doubt I speak a year or so too early. I read with interest a speech that he made called "The Path for 1981", on 4 January 1981. He talked about the recovery and the new prosperity that will flourish, but he also said:
Areas of former prosperity will be by-passed, with heavy social consequences.
I hope that when the Secretary of State plays his role in the Department and talks in the sub-committees with his junior Ministers about decisions that have to be taken about coal, with all their regional implications, his own feeling that some areas will be bypassed will not rule. It is one thing to say what he said in Guildford or East Surrey, but it appears different in other areas. We should know what the right hon. Gentleman has in mind.
Our motion speaks of an overall energy policy, practically, as well as in principle, and of a pricing policy for industrial users of energy. There is a fear in the coal industry. We want the industry to move and to be positive and forward-looking, with investment that will bring results in the years to come. Only the Government can tell us whether that will happen.

The Secretary of State for Energy (Mr. David Howell): I beg to move, to leave out from "House" to the end of the Question and to add instead therof:

'recognises the realism of the Government's energy policy and welcomes the renewed vigour with which the nation's energy resources are being developed'.
This is my first opportunity to welcome, as I do, the right hon. Member for Leeds, South (Mr. Rees) to his responsibilities as energy spokesman for the Opposition. I understand that he is not a member of the "gang of three" or the "gang of four" or any of the other gangs which roam the Labour hinterland, so he is all the more welcome for bringing his well-known fairness of mind to these subjects.
I also thank the right hon. Gentleman for the opportunity which the choice of this subject for a Supply day debate gives us for a wide-ranging discussion of energy issues. What usually happens is that bits and pieces of energy policy come bubbling to the surface. At one time we deal with industrial energy prices and at other times with oil policy. We do not have enough opportunity for a really wide debate on the overall picture. I therefore welcome this opportunity.
The right hon. Gentleman also mentioned the need for information. The papers put to NEDC by the Government were published and are freely available. I hope that that meets that need. Of course, I am always ready to provide more information for the House. I supported the development of Select Committees, which has been supported by my party over the years, and have taken the view that the House and its Committees are the places where these things should be debated. That is why I felt that the Energy Commission was not the right place to do these things.

Mr. Peter Hardy: Just before the Christmas Recess, I asked the Secretary of State to publish his estimate of coal consumption in 1981. He did not publish, and said that he had no plans to do so. How does that fit in with what he just said?

Mr. Howell: If the hon. Gentleman would like to table a question that I can answer, I will, but if he asks me to speculate on things which cannot be speculated on it will not help him or anyone else to offer mere generalisations about the future.
In the context of this overall picture, I remind the House of the turbulent scene within which we must consider our energy policy and of some of the basic facts against which we are working. The first is obvious but so staggering that it is worth repeating—that since 1972 the price of crude oil has increased by 1,800 per cent. In fact, it has nearly tripled since early 1979, although, because of the effect of the appreciation of sterling, it has less than tripled—it has just about doubled—for the United Kingdom. That is the magnitude of the volcano, the price earthquake, against which we are operating.
Those effects are rolling through every Western economy—we are not special in this respect—and are having a major impact on the energy scene in every Western economy. The first and most important thing to grasp is that, despite our North Sea oil, there is no escape for us from the price upheavals and the disruption that those colossal changes cause. Whether we take the impact on a higher exchange rate because we are an oil-producing country or on unemployment or on loss of overseas markets or on a mixture of the three, there is no escape from those terrific shocks.
Of course, we can have debates about what we do as a major oil producer with the revenues which accrue, and there are different views in different parts of the


House—between those who say that we should use them to reduce Government borrowing and pave the way when we can for lower taxation and create a better climate for enterprise, and those who say that we should use the revenues to pick winners or back hopefuls or pay for losers, or whatever it is. I know which of those I prefer. But there is no escape from the disruption and the shock that quantum price leaps of this kind have on economies such as ours.
That brings me to the first major point, and I am sorry if the House feels that it is a somewhat gloomy one. Much the worst danger facing the Western economies at the moment is of a further oil price explosion of the 1979 variety. That is why it is absolutely vital for there to be international work to prevent the sort of panic buying based on psychological fears which we saw in 1979 after the Iranian revolution, which led to the fantastic price increases of 1979 and 1980.
It is essential to see what can be done, on both the demand and the supply sides, to prevent the same consequences flowing from the effects of the Iran-Iraq war, which overnight knocked 4 million barrels a day out of the world supply system. There has been some progress in recent months towards ensuring that stability is achieved.
The right hon. Member for Leeds, South mentioned the International Energy Agency. There was a unified recognition in that body of the need to discourage panic buying and to see that countries on the whole drew down their very high stocks—they have been high because of the recession—rather than rush into markets and pay wild prices for term oil. That was an advantage, and informal arrangements were also agreed which I set out in my written answer to the House about measures which might be taken if one particular country, or indeed one particular company, found itself cornered and short of crude following a sudden interruption of supply such as followed the Iran-Iraq hostilities.
That is on the demand side and that, combined with the effects of the recession, has meant that demand has remained well down. On the supply side, too, there has been some effective international co-operation. We should not just ignore that. The OPEC countries—the Saudis in particular—when that war took place were contemplating cutting production, but they changed their minds and decided instead not to cut production, which they could do as political acts, and the Saudis decided to increase it by, in effect, 2 million barrels a day. So the supply moved up to compensate for what was lost, and on the demand side there was the restraint that I have described.
The net effect is that while prices have gone on pressing upwards there has been nothing approaching the sort of explosion of prices of 1979, which no sensitive modern economy can absorb without major social disruption. I have to warn the House that dangers remain. We are on a knife edge and will remain so as long as the West generally remains so heavily dependent on oil from the Middle East and through the Straits of Hormuz. Those are the broad considerations which are vital starting points for our endeavours.
I turn to the effects on us of what has happened and is happening. The first effect of the enormous increases is that the price of oil in this country is dragged up. One hears it suggested that the price has been put up by the

Government, but that is not so. Some suggest that it has been put up by OPEC, but even that is not so, except in the sense that OPEC influences production levels.
The high price of oil is determined by the laws of supply and demand. Anyone who doubts that should try to sell a barrel of oil on the Rotterdam market or anywhere else for more than the world market price or try to buy a barrel for less than that price. He will not succeed. We are constrained by the world market price. That is inescapable.
The second effect that follows from the enormous price increases is the flight from oil into other fuels. When oil users face an enormous increase in price they turn rapidly and in large numbers to gas.

Mr. Skeet: I am sure that my right hon. Friend is trying to put a fair interpretation on OPEC's actions, but surely only marginal quantities of oil pass over the Rotterdam market. Is not OPEC following the small sales on the Rotterdam market in order to interpret their price? It is the cartel which is laying down what the world will pay, and BNOC follows it, at least in part.

Mr. Howell: Supply and demand determine the price. By influencing the production, OPEC countries can influence supply, which, in turn, influences the price. I do not think that there is much difference between me and my right hon. Friend on that point. There is a world market price at which the buying and selling of oil, including that of the United Kingdom continental shelf, takes place.
As I said, the second effect of price increases is that there is a major flight of those using oil in industry into the use of gas, which has created a major excess demand for gas. That drags up the price of gas and all other energy prices. There were big increases last year, and, as the effects roll through, further increases in domestic and industrial gas and electricity prices are on the way this year. It would be wrong for me not to warn the House about that.
The third effect of the price increases is that the enormous additional demand for gas that results from the flight from oil drags up the price that can be obtained by gas producers in the North Sea, whether on the Norwegian or the British side of the median line. Gas is being sold, and producers are seeking prices, at up to 10 times—1,000 per cent. higher—than the price established for contracts in the North Sea in the 1960s.

Mr. Arthur Palmer: Why does the right hon. Gentleman put such stress on oil prices forcing up the price of electricity? Surely there are many other factors at work, including the borrowing costs of the electricity industry.

Mr. Howell: We shall come to the nature of those costs. I am starting from the basic mechanism that has sent the enormous changes through the system, and that is the huge increase in the world market price of oil.
There are some who say, in the face of everything that has happened—and there may be some hon. Members who share the view, though I do not think so—that we should step in and try to run a two-tier price for oil. After all, they say, we are an oil producer, so we could sell oil to ourselves on the cheap and have a subsidised oil price. I do not think that industry is asking for that, and I have not heard many hon. Members asking for it.
I ask those who think in that way to ponder the implications of what they suggest. The first is obvious. We


would do ourselves out of the high revenues. It may be less obvious, but others would collect the revenues, because subsidised oil would be sold at the market price. Secondly, we would drink up our North Sea resources, which are limited and will not last for ever, all the faster. Thirdly, we would kill North Sea investment stone dead. Fourthly, we would leave our industry totally unprepared for the high-cost-energy world which is inevitable and which involves major adjustments. In other words, we would be putting Britain in the worst possible position, instead of the best possible position, to face the stormy 1980s. I ask those who argue that line to put it aside when they realise the implications.
There are those who ask why we do not step in to control other energy prices. It is not my impression that industry is asking for that. On the contrary, the most recent NEDC meeting made it clear that there is general agreement in industry and among all who have discussed the matter in NEDC that prices should be economic, by which is meant that they should reflect the cost of replacement on a long-term basis.
Industry's complaint was that the outcome of pursuing economic pricing was to put Britain at a disadvantage to our competitors, particularly those on the Continent. If that were correct it would be extremely serious, and as soon as such suggestions were raised my Department and I looked at them closely. At first, the proposition was that Britain was generally at a disadvantage on energy prices. My Department did not accept that, and the subsequent debate and analysis culminated in a study by the NEDC, which concluded that British industry generally—I emphasise "generally"—does not suffer a disadvantage, but that bulk users in energy-intensive industries could be at a disadvantage. Chemicals, steel, foundries, and the paper and board industries were mentioned.
The Government were concerned when they heard about the feelings and worries of the industries concerned. From early last year—long before the recent NEDC reports—a succession of measures were taken. I shall come to those later. However, despite some earlier doubts, there seems to be among those who have studied the matter general agreement that there is no case for overall general intervention to hold down energy prices in the face of the forces that I have described that are playing upon our affairs.
There are two reasons why I believe that general intervention would be wrong. The first is that the industries that are energy-intensive and facing particular difficulties are, in some cases, facing structural problems that go far deeper than anything that can be solved by changes in energy prices.
It would be misleading for me to suggest to hon. Members, or for them to suggest to their local manufacturers, that there is a wand to be waved on energy prices that would solve some of the deeper and much longer lasting structural problems of some industries, of which steel is an obvious example. In addition, the recession has made things much worse.
Secondly, the problems of those industries include the threat of unfair trade. Chemicals and textiles are the obvious examples of industries in that position. There is no doubt that British industry, along with almost the whole of European industry, is being severely threatened by artificially low oil and gas prices in the United States. There is no doubt about that. My right hon. Friend the Secretary of State for Trade and I have taken, and will

continue to take, vigorous action both in the Community and at a bilateral level. Although we must move at Community level, there is no reason why we should not move at a bilateral level also.
Under the new American Administration there may be a faster movement towards deregulaton of oil and gas prices. There is reason to hope that that will happen. When I see the Energy Secretary in the new Reagan Administration I shall make that point to him. I hope that deregulation will be recommended to the new Congress. That issue, however, lies outside the immediate problem of the competitiveness of British industry vis-a-vis the remainder of Europe.
I must also reject the further proposition of general intervention in energy prices. Some suggest that the answer is to move more quickly towards loading fuel costs on to domestic prices. Indeed, industry has been pressing me quite hard, and also pressing other hon. Members, about the proposal that there should be a faster rise in domestic gas prices than that already envisaged. I ask industry, and those who argue that way, to reflect on whether that proposal would be in their best interests. The Government have already approved a 10 per cent. increase in domestic gas prices in real terms over a three-year period. I announced that measure a year ago. It is a gradual programme to allow prices to rise to the correct levels at which they cover the long-term cost of supply, which they do not cover at present. Even now, domestic costs are only just breaking even. Domestic costs in Britain are only half of those in France and Germany.

Mr. Edward Rowlands: Did the Minister say 10 per cent.?

Mr. Howell: That is right. I said 10 per cent. in real terms. Our domestic prices are only half those paid by the French and German housewives. Of course, the gas all comes from the same pool, namely, the North Sea. At the same time that we announced that measure the Government decided to accompany it and give extended support for fuel hardship. It was twice as much as anything previously produced. My right hon. Friend the Secretary of State for Social Services has set out a comprehensive programme. In those circumstances it would not be right to allow domestic prices to be corrected even faster. Industry should reflect on that and understand that it would be wrong to press that point.

Mr. Arthur Lewis: I wish to question the Minister on that point because it affects every hon. Member. I appreciate his remarks about domestic prices. However, he will be aware that many old-age pensioners and sick and disabled people do not understand their bills when they receive them. Consequently, they find themselves in arrears and have their supplies cut off by either the gas or the electric companies. Could not the Minister make some arrangement to ensure that before they are cut off the companies concerned contact the social security department to determine how much harm and damage could be done? It is not fair to cut off the elderly, with all the kerfuffle that that entails, when they could first be contacted and warned by the companies concerned, which could then find out the real position.

Mr. Howell: The hon. Gentleman follows these matters closely, and he knows that there is a disconnection code. Pensioners in the position that he has described


should not be cut off in winter. If they are, we obviously need closer policing of the code. The Under-Secretary, my hon. Friend the Member for Kingston upon Thames (Mr. Lamont), is actively involved in ensuring that some interim improvements are made in the code, pending a more thorough report about the whole code. He has discussed the matter with the chairman of the London Electricity Board and others involved to determine how we can ensure that the code is observed. If the hon. Gentleman has a particular instance in mind, we will examine it.
I have already said what would be wrong and irresponsible for us to do in reply to the view that high energy prices—because of colossal increases—are causing difficulties both for industry and for society as a whole. I now turn to what can be done—

Mr. Allen McKay: On two or three occasions the Secretary of State has said that industry is not concerned about the present position. At a recent meeting with the Sheffield chamber of trade representative in Sheffield, he said—and I wrote down the words so that I could quote them:
The biggest single factor of troubles in industry is the cost of energy.
The Sheffield chamber of trade, together with the council, intend to write to the Minister to request a meeting to explain their position. I shall be grateful if the right hon. Gentleman will receive them.

Mr. Howell: There have been a great many representations. That is why I have described the Government's reaction, how we see the position, and what we believe to be the best approach. I have argued the case against a general intervention, which would be utterly wrong. I must now ask the question—and I shall seek to reply to myself—what can be done? I wish to remind the House of what has been done since concern was first expressed—I refer not to recent weeks but to some time ago—about the high increases in energy prices that have rolled through our economy. In March, the British Gas Corporation—with the Government's approval—tempered for the bulk of its firm gas supplies, its long-established policy of relating its firm gas supply prices to gas oil, the nearest competing product. Instead of full equivalent relationship it moved to 75 per cent. of the gas oil price.
In July, I asked the electricity industry to undertake a major study of the bulk supply tariff, and it will shortly make an interim report to me. In August, I brought these issues to the attention of the National Economic Development Council for the first time. In the light of allegations then being made that British industry was generally at a disadvantage, I asked the CBI to prepare a paper analysing the charges and allegations to determine precisely where the problems lay. It willingly undertook to do so. In November, I urged the electricity supply industry to seek new flexibility in its contract and tariff terms and to find ways to supply some of the major bulk users more cheaply through a better management of supply and load needs—although we recognise that, whatever we do, we are not in a position to match the very different cost structures of countries that have large sources of hydropower, which is by far the cheapest, or that have pricing policies that are closely related to the operating costs of nuclear plants.
When looking at the position on the nuclear power front among our competitors, it fills me with concern that during the 1970s we dithered about nuclear power. By the end of 1985 France will have 44 per cent. of its power coming from nuclear generation, and West Germany will have 25 per cent. There is no way on fossil fuels—coal, let alone oil—that we can compete with the cost structures being built up by other countries. I wish to put that fact on the record. I am prepared to take responsibility for many things, but not for the dithering indecision about nuclear power in the second half of the 1970s. However, I believe that we can take steps to put right that position in due course.
In response to further requests from me in the autumn, the British Gas Corporation has agreed that new customers who, in their first year, pay a price about full equivalent to gas oil, will be charged at about the renewal price—the 75 per cent. rate—for the second and third years of their initial contracts. That should bring some alleviation of the problem. More recently, I asked the corporation to consider what further assistance it could justifiably give to the larger bulk users in energy intensive industries. I refer to those on firm contracts. There are not many, but the burden is heavy. The corporation has agreed to pursue that proposition.
I have further discussed with the electricity industry the possibility of cost savings through load management, and the industry is actively considering that. Savings through that approach would benefit customers with appropriate load characteristics. They include some of the major bulk heavy continuous users. I put this proposal to the new chairman of the Electricity Council, Mr. Austin Bunch, whose appointment I am announcing today, and he has agreed to pursue it swiftly.
These are some of the things that have been done over the past many months. We eventually received the CBI report, and now there is the NEDO task force, which has started from the point that generally British industry does not suffer but that larger bulk users, in particular in the energy-intensive industries, may do so. As I have explained, this is the view that the Department has taken over the months, to which I have responded. As all sides are represented on the task force, it will provide a unique opportunity to reach agreement on the facts, which will be very helpful. The Government will obviously consider carefully the facts established by the task force.
In particular—the right hon. Member for Leeds, South mentioned this point—I know that one of the points made all along by the industry is that our heavy fuel oil duty is higher than that of other European countries and that that has put our oil prices to industry out of line. In fact, the latest available statistics show that in early January our oil prices to industry, including tax, were somewhat lower than those to Continental industry. Since then—even in the last few days—I know that United Kingdom prices have gone up again, but crude cost increases are also working their way into Continental prices. Therefore, it would be wrong to assume that the United Kingdom's favourable position will necessarily be altered again. I freely concede that these things swing round. I know that my right hon. and learned Friend the Chancellor of the Exchequer has heard the strong views of industry arguing for a reduction in heavy fuel oil duty to bring it more into line with the similar duties being charged by our Continental competitors.

Mr. Tim Eggar: I am sure that the House is impressed by the various measures that my right hon. Friend has indicated today, but could he give some idea of how much revenue will be forgone by the nationalised industries as a result of those measures and whether that will have any impact on the public sector borrowing requirement in the coming financial year?

Mr. Howell: No, I cannot. The simple reason is that the quantification of those who are in difficulties—particularly the bulk users—is still far from clear. One of the purposes of the NEDO task force will be to bring home more clearly what degree of shading and adjustment is needed to meet the particular worries of the bulk users which, after all the argument, was what the whole thing came down to.
Those are the things that have been done. I repeat my view that it is no good applying general remedies—even if this kind of intervention were a remedy, which I do not think it is—to particular problems. As I said, it has been difficult, amidst the general expressions of concern, to identify the real problems. The appreciation of sterling has further distorted these international comparisons. I have heard it suggested that if we discount sterling appreciation over the past 18 months the overall slight advantage that British energy users have had would have been greater. Obviously, that makes all the comparisons more complicated.
What more can be done to meet the problems of efficient energy supply and of easing the burdens on industry as it prepares for the move out of recession into recovery? First, there must be greater efficiency in the nationalised industries. [Interruption.] The Opposition should listen to what I have to say on this matter. The key weapon here is to have tight and demanding external financial limits or cash requirements. I have heard it suggested that the effect of tight and demanding EFLs is to put up prices, but that is not correct. The purpose of these challenging EFLs is not to put up prices, but to push down costs and to increase efficiency. The nationalised industries—which seem to have very few friends in the Opposition—and their chairmen recognise that these cash limits are a tough and effective discipline in reducing costs and increasing efficiency. That is the way in which the Government can ensure that industries take all possible steps to increase efficiency rather than to turn to their customers—who may be captive customers—and load it on to them or to resort to more borrowing.
Although there is a long way to go in improving efficiency in the nationalised industries, it is a fact—if I can get this over to the hon. Member for Merthyr Tydfil (Mr. Rowlands) who seems to be getting excited—that labour costs per unit have been falling faster in the electricity and gas industries than the average for the whole of United Kingdom industry. Efficiency still needs to be increased. However, the EFLs are an effective weapon, and are recognised as such, for increasing efficiency in industry, not for raising prices or adding a tax as some people have suggested.
The tariffs that emerge come not from the EFLs but from either competition—in the gas industry there is competition between oil and gas—or, in areas where there is a monopoly supply condition, from adhering to the principle of covering costs on a long-term basis, which everyone recognises is the only sensible principle.
The second thing that we can and must do is to increase competition. I have already told the House of our plan, when a suitable legislative opportunity arises, to introduce greater freedom for private electricity generation. I think that that will improve competition, and competition is healthy.
The third thing that we can do is to encourage investment in new energy resources, including investment in conservation and equipment that will use energy more efficiently. In that respect, some major developments are going on. The gas, gathering pipeline—an enormous project—is going ahead and is on schedule. We have had the sixth round of oil licensing, which I inherited from my predecessor, and the seventh round is in process of going through now. There has been criticism from some, including the oil industry, that the petroleum production tax announced by my right hon. and learned Friend was over-burdening the industry and would slow down exploration. When the first part of the seventh round was announced—that was after the new tax regime had been made clear—every licence offered for exploration was eagerly taken up and paid for by the industry.
The fourth thing that we can and must do is to sustain heavy investment in coal—I want to come to some of the points on that aspect made by the right hon. Member for Leeds, South—and in nuclear power. Frankly, the programme of nuclear power, if such it can be called, that I inherited when the Government came to office was in complete chaos. I think that we are now getting it straight and beginning to get some momentum and morale and confidence restored, but we had quite a mess to clear up.
We can also encourage major investment in conservation. Conservation investment—if I may say a passing but not unimportant word on that aspect—primarily goes on through the decisions of industries and individuals. It is not publicly visible in the public spending figures. Therefore, people tend to compare what they see with the major investments which are visible in public spending and to conclude that there is no major investment in conservation. But there is evidence that it is continuing at a very high level in industry. The best way to promote conservation investment is not to throw more taxpayers' money at it but to see that the price signals are correct and stimulate the right new investment backed by research and demonstration projects which industry can use commercially and with confidence. That is what we can do on that front.
I turn now to the coal industry, on which the right hon. Member for Leeds, South had a good deal to say. I know that the coal industry, like all industries, as the right hon. Gentleman reminded us, faces immediate short-term problems of falling demand in the recession. Of course it does. Also, because it is an extractive industry, closures and exhaustions are bound to lead to difficult decisions. No one has sought to disguise that fact, certainly not the realists in the industry. I do not share the defeatism or believe the allegations of low morale that have been expressed by some Labour Members. That is not the impression that I have of the industry. If morale is so low, why is productivity and output per manshift so high? Why are recruits queuing up to join the industry? It does not add up. The evidence is that people want to get into the industry. Morale is high, not low, as the hon. Gentlemen suggested.
In spite of all the immediate difficulties, my long-term confidence in the coal industry as a successful and


profitable energy industry is complete. I believe that it can and will overcome the present problems and achieve financial viability.
The right hon. Member for Leeds, South asked what we thought about "Plan for Coal". We have provided a financial strategy and framework. We have provided both the framework and the means for the National Coal Board and the industry to attain the "Plan for Coal". How that plan is maintained is a matter for the National Coal Board. We have provided the opportunity for it to be maintained, and it is for the NCB to see how that is done. I believe that it can be done.
The right hon. Gentleman mentioned the growing revenues from North Sea oil and gas. People ask "Why not plough back the North Sea oil revenues?" The answer is simple: they are being ploughed back. They are being ploughed back through industrial and regional assistance and Government funding—some of which is not popular or to every hon. Member's liking—through research support, through reduced, downward pressure on Government borrowing, thus paying off the overdraft that we inherited, and through substantial tax reliefs to industry. In my view, those last two measures are the essential conditions for the new investment, because without them there will be no new investment. Industry must make, and in some instances increasingly is making, that investment—an investment which will be energy-saving and more energy-efficient. In Japan, firms are now tearing out oil-fired or inefficient high energy-consuming systems and replacing them with entirely new equipment in order to be competitive in the high-cost energy era ahead. Our industry must do the same, and must re-equip. Otherwise, we shall be unable to compete in the late 1980s.
Contrary to the argument that we have no policy, we are in fact ending the shambles of subsidy and control, thus achieving two further vital aims which I want to outline. The first concerns security of supply. I reject again the proposition that we should behave like the United States in the 1970s and run an internal subsidised oil price, and intervene in that way. That would be utterly irresponsible. It was a catastrophic policy for the United States, as both the outgoing and new Administrations have recognised. It led to some of the highest international tensions that have occurred since the Second World War. That course I know to be wrong.
People talk about lower gas prices. They wonder why we cannot have lower gas prices, like the French and Italians. Not only has the French gas price risen by 70 per cent. in the last year—something which is perhaps overlooked by those who favour lower gas prices—but there were major interruptions last spring and summer even for companies on firm gas contracts, not nominal interruptible contracts. Indeed, last winter in Italy companies, whether on firm contracts or provision for interruption, were cut off completely. Cheap gas is no good if there is no gas. People tend to overlook the value of security of supply until, of course, there is no supply; and then they change their view. That is something that our energy policy has been and is achieving.
Secondly, we are paving the way for new investment in energy and energy-related industries on a massive scale. Indeed, it is happening now. That gives Britain an important advantage because all over the world major

projects and investment, the large export markets, are related to energy development and energy projects in the energy-producing countries. That is happening around the Pacific basin, in the Middle East, and everywhere where people think that they can tap new energy resources.
The right hon. Member for Stepney and Poplar (Mr. Shore) moans, as he did during the economic debate, about the lack of effective demand, as though he had just read "General Theory" for the first time, but the effective demand in these industries is there. There is vast expansion across the world, and vast opportunities, and, as a result of our policies, these British industries are building up to the most advantageous position, from which they will be able to seize those opportunities.
No one questions the difficulties of transition. Certainly I do not; nor do the Government. No one questions the need to allow and encourage industries that use a lot of energy to respond by bringing in the new less energy-intensive technologies. But that is not an argument for reversing the policy or plunging into a wilderness of subsidies.
It is an argument for sensitive response by fuel supply industries. I have described what we have sought to do, and I shall continue to do everything possible to encourage that process. It is an argument for well focused transitional aid by the Government, and the whole thrust of our economic policy is in that direction. I must admit that some of the aid offered is not always taken up, as happened with Bowaters at Ellesmere Port, where the aid was offered but the closure decision still went ahead. Perhaps most important, it is an argument for waging war on unfair trade practices by other countries. Every Government Department is ready to take up any allegations or evidence of unfair trade practice wherever industry can provide the details.
That has been and will continue to be our policy. If we stick to it, as we shall, I believe that it will provide—indeed, it is already providing—the foundation for an economic recovery which will be strong and sustained, rather that feeble or short-lived. That recovery itself will give us increasing resources to help the hardest hit. I believe that it would be an utter betrayal to try to cocoon our country against the reality of high priced energy only to have that reality hit us with typhoon ferocity later. Conversely, everything is to be gained for the British economy if we let it adapt now to the dangerous and stormy conditions ahead. If we have the determination and steadiness now to let that process go forward, in the years ahead there will be very few national economies stronger than the British. For all those reasons, I ask the House to reject the motion and support the amendment.

Mr. Lawrence Cunliffe: I want to refer first to one or two matters raised by the Secretary of State for Energy, and particularly to the mining industry. He wondered why—in my opinion his remark will be interpreted by the British mining industry as a rather niggardly and grudging compliment—morale was low, as Opposition Members alleged, when productivity was so high. There is no single reason for high productivity. One reason is that the previous Government had the foresight and vision to produce a massive investment programme that was to put the British mining industry on a par with any great industry in Western Europe or, indeed, the world. A further reason is the sustained effort of the British


miner. He has operated in an atmosphere of good industrial relations, has accepted on many occasions maximum mechanisation of the pits, colliery closures, and reduced numbers of men employed within the industry.
The Minister tried to appraise the situation in about 40 seconds. That will do nothing to boost the morale of employers and employees in the industry. The irony is that 1979, in terms of production, industrial relations and maximum effort, was a remarkable year. It is acknowledged, not only by my hon. Friends but by the CBI and other industries, that 1980 was another wonderful year of achievement.
In the last few weeks results have improved steadily. British miners ended the year with a near all-time productivity record. Output per manshift in successive weeks in December was 2·46 tonnes. That is only one-hundredth of a tonne less than the record for production set seven years ago.

Mr. Skeet: Will the hon. Gentleman give way?

Mr. Cunliffe: It is too early. All that is against the background of 7,000 fewer miners in the industry and many colliery closures.
Sir Derek Ezra, the chairman of the National Coal Board, said:
These improved results are coming at the right time—they are badly needed to help the industry to cope with major problems inflicted on us by the general recession in Britain.
Who created the general recession? It was created by the Government and their crazy economic policies. Industries are no longer able to predict their productivity requirements.

Mr. Skeet: I congratulate the miner on his increased productivity, but what will the country do with 50 million tonnes of stock?

Mr. Cunliffe: I shall come to that later. I am sure that the hon. Member will be attentive. There are alternative formulas to the straitjacket of pure monetarism.
Let us examine the current situation developing in the industry. The Secretary of State called for greater efficiency in industry. The British mining industry has nothing to fear in that respect. Its record is impeccable in comparison with other industries in Britain. By a wide margin it still has the lowest production costs in Western Europe. Coal will remain considerably cheaper than heavy fuel oil. That is one of our strongest bargaining weapons when we sell our coal in the European and world market.
The recession is caused mainly by the Government's silly, doctrinaire policies. The Government have deliberately slowed down industry by insisting on a strong pound and a high interest rate. Those policies have had their effects on the mining industry. In 1980–81 we shall lose 6 million tonnes of business simply because of the industrial recession. The problems are intensified, for obvious reasons, by the importation of foreign coal. Coal imports are three times higher than they were under the previous Government.
The argument is that coal imports act as a spur to the industry. It is argued that they cause a psychological fear about job security and opportunity. The whole of British industry suffers from that fear. The Government believe that they can use that old-fashioned technique to bring workers to heel and reduce wage demands. The board has to face a practical problem. Extra stocking costs will add seriously to the industry's financial problems. There are

physical limits to what can be put on the ground. We are talking of an extractive industry. Coal has to be physically deposited.
I understand the Government's distaste for intervention. A philosophical conflict is involved, especially in financial intervention. The industry has met all the targets set by Government. It has been exhorted on many occasions and has filled the gap in British energy shortages. Surely there is now a case for selective help and intervention in that industry.
The productivity agreement signed by the National Union of Mineworkers and the National Coal Board produced remarkable results. As stocks grow and productivity increases, the Government should recognise the need for sensible and prudent intervention. They should provide some form of subsidy on stockpiling so that we can live through the current problems caused by the industrial recession brought about by Government policies. Is that not fair? Does that not apply the Queensberry rules in relation to fair trading competition? The Government should take immediate action.
Assurances have been given. At the Venice summit the Prime Minister and other leaders of the industrialised nations said that steps would be taken to encourage long-term commitments by coal producers and consumers; to improve infrastructures in both exporting and importing countries, as far as is economically justified, to ensure the required supply and use of coal. The Heads of Government agreed that the industrialised nations must rely on other fuels than oil to meet the energy needs of future economic growth.
Will the British Government honour the commitment made at Venice? Are they still on the same wavelength? The call is for a doubling of coal production by 1990. Will the Government renege? Strong and persistent rumours are spreading throughout the British mining industry. At a recent meetimg of the NUM an area director said that he had been instructed to impose severe cutbacks in coal production in his area. A national executive member predicted that if the cut to be applied to the North-West were multiplied throughout the mining areas, 9 million tonnes and 20,000 mining jobs would be lost. Will the Minister confirm or deny that?
I turn to European Community action. The European Coal and Steel Communities should assess the situation caused by the industrial recession. They should examine in particular our mining industry. I hope that the Community does not pay lip service to resolutions of its Consultative Committee. One such resolution urges the Community to assist in financing the production and use of coal. This gives the Council of Energy Ministers an opportunity to take action and end their longstanding deadlock on coal policy. I hope that the Government pressed that point at the European meetings. The Consultative Committee, which represents coal and steel producers, consumers, traders, trade union representatives and other interested parties, also calls on the European Commission to develop urgently fresh initiatives to implement positive policy for Community coal, in particular promoting investment in coal production by grants or, at least, reduced-interest loans.
If the Secretary of State wants alternatives, we can point them out to him. He talks of the flight of British industry to gas. There could be a similar flight of British industry to coal. If industrialists were given some guarantee, loan help, a lowering of interest rates or any


financial help whatever, many of them would convert back to solid fuel tomorrow. That is what is called for. Help should be given to the many industries which desire to do these things. We also need more vigorous and intensified encouragement and support for research and development of mining techniques, coal utilisation and so on.
If there is strong support for providing United Kingdom industrialists with incentives to convert from oil to coal and to use energy effectively in the years ahead, it is estimated that we could save approximately 14 million tonnes of oil a year and open up a market in industry for 23 million tonnes of coal. The Minister says that intervention is not generally appropriate. I remind him that several countries already offer financial assistance to encourage the move away from oil. Australia uses tax concessions; France offers a variety of incentives; Japan is introducing grants and subsidies at low interest rates; in the United States of America major industrialists are prohibited from building new oil or gas-burning boilers and receive tax credits for capital investment in coal-fired equipment. These possibilities should be considered sensibly.
A realistic approach should be adopted to try to help in the great energy crisis which will undoubtedly engulf the world in the next decade or two. I hope that in this regard we shall accept the example of the United States, which has decided to convert more than half its electricity generating stations back to coal-fired plants. The Americans have made dramatic improvements. They forecast that the coal share in electricity generation will increase by 30 per cent. to 35 per cent. If we are to reach our target, set in Venice, by 1990 we should also be moving in that direction. Dramatic improvements can be made if we have the will and the determination and if the Government will act.
The price differential between coal and oil is such that it is much more economic to build and operate a new base-load coal-fired plant than to build and operate a comparable oil-fired plant—those are the facts of life—even with full environmental controls adding 25 per cent. to the capital cost and 10 per cent. to the ultimate price of electricity.
I should say a word of caution about a too-rapid development of nuclear energy. We all know of the American experience on Three Mile Island. The Americans already have 70 atomic plants, producing 12 per cent. of their electricity. Since that experience 15 nuclear projects have been cancelled and no nuclear complex of any kind will be built in the next two years. The simple reason is that there is still a great degree of uncertainty. No one can predict with any accuracy whether the kind of safety techniques being employed in the development of nuclear energy are first-class and absolute in view of the potential dangers that one normally associates with this form of power.
The British public's greatest objections to, and their principal fears about, atomic energy are twofold. The first concerns the safe disposal of nuclear waste. Spent fuel rods containing radioactive isotopes remain potentially lethal for thousands of years. The British public must be convinced that there are proper safeguards. If nuclear energy is to be developed for consumer purposes, there must be absolute guarantees.
Secondly, when one has the benefit of electricity generation by gas, oil or coal, it can be turned off virtually immediately in an emergency. Nuclear plants, however, while they can be isolated to a degree, are absolutely perilous. There is no argument about that. Much more money will be needed for the training of staff and the development of far more stringent safety laws before we can be assured that nuclear energy can play a positive and permanent role in our society.
I do not believe that anything that the Government have said so far will boost the confidence or the morale of the energy-producing industries or of the British people.

Mr. T. H. H. Skeet: I listened with interest to the hon. Member for Leigh (Mr. Cunliffe). I wish to pursue a number of points that he made. I raised one in an intervention, namely, the question of the very large stocks. I said that they were 50 million tonnes. In fact, the figure is close to 40 million tonnes. I believe that that is a record figure. In 1979, it was 29 million tonnes. By October 1980, it was 36 million tonnes. It is now approaching 40 million tonnes.
"Current Energy Trends" shows that production is up by 3 per cent. and consumption is down by 5·7 per cent. Stocks are excessive. This means very heavy commitments for the National Coal Board. In those circumstances, one needs to know what the National Coal Board intends to do.
The Opposition motion refers to the "Plan for Coal". That was endorsed many years ago, of course. It had two facets. One was that the Government of the day would considerably increase investment. I understand that we are at present spending some £700 million per year on it, so the Government have kept to the commitment. But what about the National Coal Board and the miners? The other part of the commitment was to get rid of uneconomic capacity.
I listened intently to the right hon. Member for Leeds, South (Mr. Rees) when he indicated that he was not against closures if the pits were not financially successful, provided that new ones were opened. That is precisely what the Government are doing. There is an inquiry on Belvoir now. Whether it will come into operation is another matter. Personally, I have been against it, but I can see certain arguments in its favour. Over the years, however, we have not had the closures that would make for an effective coal industry, and it is because of the extensive losses that the coal mines are in great difficulties today.
I wonder whether the Opposition have recognised the force of what they are saying. The production of the coal mines by 1985 would be 135 million tonnes, and by the end of the century it would be 170 million tonnes. We have already been told that it will take 10 years to build a mine and bring it fully into operation. Selby will not be producing at full capacity by 1985. If production now, with opencast, is 120 million tonnes, the industry is likely to be well off target. Therefore, one can denounce the figures that the Opposition have given.
Whose funds are we dealing with? Are they the National Coal Board's? My hon. Friend the Under-Secretary told me in a written answer last year
The sources of funds available to the NCB and its subsidiaries between April 1973 and March industry. [Official Report, 2 June 1980; Vol. 985, c. 571.]


I shall quote only "Internal resources" which provided 4 per cent.—no more. All the rest comes from the public. When the taxpayers are under great pressure, they will say that if there should be no more production than the country demands, and if there is a lot of coal about which cannot be sold—and which cannot be exported because it is a competitive market—there will probably have to be certain cutbacks. That is unanswerable.
At a fairly early date we must find a method of making suitable but limited cuts in the capacity of the totally uneconomic pits. I have before me some of the NCB statistics, though not the most recent. They deal with South Wales, showing that a great number of pits there have an overall output per man-shift of under two tonnes. There are about 20. Many of them are loss-makers. Some should be closed down, because they will never be profitable and can never be modernised. It would probably help the Yorkshire and East Midlands pits and the board's overall position if some of them were closed and new capacity were opened up.
However, a booklet has already been circulated by the triumvirate of steel, rail and coal—Mr. Sirs, Mr. Weighell and Mr. Daly. The interesting part is at the back, where we find the recommendation:
no closure of collieries on purely economic grounds.
If the document's recommendations are fully carried out, there will be no possibility of ever having economic pits in the United Kingdom, and therefore no possibility of the 1980 Act ever working.
There is another problem. If we have a limited market for coal, and we can persuade the CEGB to consume 75 million tonnes a year, and probably a little more if it can, provided that the price of coal remains competitive within a certain range, where do we place the coal in the rest of the market? I should like to say that it is in the domestic sector, but that has been taken away by gas. I should like to say that it is in the steel industry, but that has dwindled to between 3 million and 4 million tonnes, and there is a certain amount of importation. I should like to say that it is in industry and commerce, but unfortunately the fluidised bed combustor, which I fully supported, is about three years from being able to make a full impact on the market. Therefore, there are another three or four years to go before anything can be done to assist the coal mining industry.
Before making what I think are some useful suggestions, I should like to read something that indicates the attitude that probably the right hon. Gentleman, and certainly other Opposition Members, will adopt. The booklet that I have already mentioned says:
The principle embodied in the 1979 TUC Congress Composite Resolution 15 that 'the CEGB and other nationalised industries must be compelled to provide an assured market for indigenous coal as a necessary guarantee of increased coal output', must be extended to a requirement that all nationalised industries should use each other's products and implemented forthwith. In particular the steel and coal industries must be compelled to make full use of rail transport.
Heavens above! What are we coming to? If that happens, there will be a cosy arrangement worked out between the three unions concerned under which it is mandatory that the coal be used. There is no right to import from elsewhere; indigenous coal must be used in all circumstances, however uneconomic, whatever the costs of production. That seems to me to be utter madness.

Mr. Allen McKay: The hon. Gentleman talked about over-producing, and asked what we should do with the

coal. Under the common agricultural policy we over-produce food, and yet we subsidise it to a vast extent and then sell it to Russia at a lower price. Could we not do something like that with coal? If we over-produce it, can we not sell it at a lower price or use it to help many old-age people who suffer from hypothermia, for example, when we have large stocks of coal?

Mr. Skeet: That is an interesting argument. As the Opposition want to pull out of the Common Market, and as they do not like the CAP anyway, I do not see why such a policy should be extended to fuels.
Why should the steel industry, for example, take British coking coal when there is such a differential between prices? In Australia coking coal costs £27·4 per tonne cif United Kingdom ports against the NCB's £45. If there is that differential, perhaps it is not unreasonable for the British Steel Corporation, even though it is a State corporation, to go abroad for coking coal.
I should now like to make one or two recommendations, because I want to assist the NCB. I think that it will have to roll forward "Plan for Coal" and probably defer the Vale of Belvoir investment, which will be too costly at present.
I recommend the closure of a limited number of pits which are perennial losers and are not open to modernisation.
I should devote resources towards the marketing of coal, with special emphasis on the fluidised bed combustor. Too much money is being spent on the production end and too little on marketing. If I could get that one point into the heads of the Opposition they would be on the road to recovery.
I shall now say something that my own Government may not support, but I think that I should say it, because I said it at the relevant time. I am prepared to consider that we may have to phase the working of the Coal Industry Act 1980 over two years from 1983–84. As the Government are to take a certain modicum of revenue from the British Gas Corporation, I see no reason why some of it should not be used by my right hon and learned Friend the Chancellor of the Exchequer for budgetary purposes in order to effect a transition from oil to coal. That may come about.
I do not want to hog too much of the time available, but I wish to make one or two other points, particularly as my right hon. Friend the Secretary of State mentioned competitive industry and energy policies. There is no doubt in my mind that external financial limits determine prices, quite apart from the market. Therefore, the price that heavy industry must pay is to some extent dictated by them. I understand my right hon. Friend's point that they could be used for a reduction of costs, but in many cases they do not operate like that, and in fact increase prices.
The tax on fuel oil, inaugurated in 1963 to benefit coal and later used as a revenue producer, is absurd today. I think that my right hon. Friend has acknowledged that. In West Germany the tax is £3·28 and in France it is 0·09p. In the United Kingdom it is £8·08. That is absurd.
My right hon. Friend's point was that in the United Kingdom the fuel oil position was a little better than in the rest of the Common Market, but in 1980 as a whole prices, excluding tax, were higher here than in all other countries studied. We should recognise that there are energy policy differences between the United Kingdom and the rest of Western Europe. One is the external financial limits, which have a distorting influence. Another is the tax on


fuel oil. I have dealt with both these matters. I turn to the third, which is that different basic data are used for the establishment of gas prices.
In the United Kingdom, gas oil is the factor. In Europe it is fuel oil. Gas prices for these industries should be assessed on a common basic oil product. If it is fuel oil, the United Kingdom should share with the EEC, and have a fuel-oil related gas price. That can be indicated as follows:
the pricing of natural gas in the United Kingdom is computed from a different base in the several countries in the EEC. Approximating the price of gas to gas oil which at current figures is 40·80p per therm would work out differently if fuel oil—the EEC base—at 27·80p per therm was employed. The price of petroleum products differs throughout Europe due in part to the proximity of the Rotterdam spot market and the consequent reductions of distribution costs.
I should have thought that that was an easy way of approaching the matter. If we settle our gas prices by different data, there will be different results. I appreciate all the steps that my right hon. Friend has taken in that direction, but he has not gone far enough yet. He mentioned that he was not responsible for the cost structures of countries such as France, which have big nuclear and hydroelectric programmes. He may have amazed the House when he mentioned that by 1985, 44 per cent. of France's power would be nuclear power. That is what we have been saying for a long time. In 1985, we shall have no more than about 20 per cent. nuclear power.
I agree that we cannot rival the hydro side, but we contemplate that France's energy costs will be very different from ours. That will be visited on the Government at the time. The Conservatives have been in Government for 18 months. Contracts have just gone out for Totnes. We are waiting for a further plant in Lancashire, and we are still waiting for the inquiry into the pressurised water reactor for Sizewell. We have not acted quickly in order to build more nuclear plants. If we want to match the French, we must get ahead with that.
I should like to make two further recommendations. An electricity tariff structure should be modelled on the European system, favouring energy-intensive industries. I agree that there is no case for any special preference to industries generally, but energy-intensive industries are at a disadvantage compared with Europe. My right hon. Friend acknowledged that, and made one or two recommendations. But they are not sufficient. We are waiting for reports. We are waiting for the Chancellor of the Exchequer. We are waiting for certain things to be done. But if the French and Germans had had North Sea oil, they would have turned it to the advantage of their industries—much more than we have ever attempted to do. We have been acting as gentlemen all along the line. I am not suggesting that we should subsidise our industries. I suggest, that if there were harmonisation of the European and United Kingdom provisions, we would be better placed.
Nevertheless, having made those comments, I will state my firm view that the proposals that have been put forward by the Opposition are absurd, and I intend to support the Government tonight.

Mr. Frank R. White: I am grateful for the opportunity of participating in this debate.

First, I declare a double interest. I am sponsored as a Member of Parliament by the General and Municipal Workers Union, which has 75,000 members in the gas, electricity and nuclear industries. I am also chairman of the all-party paper group, which seeks to represent the interests of this vital high-energy-consuming industry. Within that industry my constituency has the heaviest concentration of paper mills, and hence we are very concerned with energy policy.
I know from the discussions that I have had with my colleagues in the GMWU and with heads of industry in my constituency that there is deep concern that the Government have no clear coherent energy policy and are failing to co-ordinate the energy sources that are now at our disposal, with the inevitable result that today's lost opportunities and squandered resources will be paid for by future generations.
I understand that the Government are reluctant to intervene in the free market. After all, that is their declared policy on which they won the election. But they must forgive Labour Members when they tend to look at the Government's hypocrisy. While worshipping at the altar of free market-ism for the private sector, they destructively intervene in the public sector. How else does one explain the Government's intervention that forced gas prices up to a level 10 per cent. higher than the rate of inflation, and electricity prices up to a level 5 per cent. higher than the rate of inflation? If that is the Prime Minister's idea of constructive intervention, I advise her that many of my constituents—the poorer members of our community—wish that she would direct her personal energies in another direction.
That sort of price fixing on domestic heating attacks the weakest in our society. I am all for intervention, but this is an example of Conservative Party bigotry against these industries. The Conservatives have undermined nationalised industries, and they have attacked both management and unions in those industries. They have attacked and laid waste their investment plans and, like a pimp treats a prostitute, they have foced up consumer costs, using the extra revenues to finance their spending.
I should like to point the Minister to a more worthwhile course of intervention that most fair-minded people would support. We as a nation happily enjoy a four-fuel economy—that of coal, gas, oil and nuclear generation. It is essential that these fuels should be used in the most efficient manner. To that end, the General and Municipal Workers Union recently published a pamphlet entitled "Energy Planning for the Future". I hope that Ministers have read that document, and if they do not have a copy I shall make sure that they receive one.
Those of my hon. Friends who are waiting to speak in the debate will no doubt follow my hon. Friend the Member for Leigh (Mr. Cunliffe) in drawing the attention of the House to the position of the coal industry and coal reserves. At present, coal reserves are sufficient to support the current rate of production over the next 300 years. My union supports the view that coal, above any other fuel, should be used for bulk steam raising in industry and that industry should be encouraged to reconvert to coal burn by way of investment grants and a pricing policy that makes coal attractive for this purpose.
Gas is a clean, controllable fuel, which presents the user with few storage problems. It is ideal for small-scale heating and for premium industrial use, where tight temperature control is required. However, its special


advantages are wasted if it is merely used as bulk heat. It should therefore be priced accordingly and withdrawn from the heavy industrial market as quickly as possible.
On the question of oil, we need a well-defined policy on depletion to ensure that supplies last as long as possible. That cannot be achieved by the Government withdrawing from the market. It requires constructive intervention, and the Government should re-examine their policy towards the British National Oil Corporation. A depletion policy must be aimed at the point of use. As far as possible, oil use should be confined to non-substitutable uses.
Electricity should not only provide light and heat. Other uses can and should be found for it, particularly in the electrification of transport—not only in mass transport schemes but in short-distance and local schemes, such as battery-operated buses and cars.
In short, we have precious little time really to get to grips with the energy problem, and the Government must take positive initiatives in this area. Our abundance of energy sources places a responsibility on us to ensure a sensible use. That can come only from a willingness by the Government to intervene, both with legislation and with cash.
Recently, the science policy research unit at Sussex university concluded that if over the next 20 years all industrial boilers now using oil were converted to coal burning it would cost the nation £150 million a year. That would be a positive step in energy conservation and in the correct utilisation of resources. It would also be of great benefit to the machinery and engineering supply industries.
If hon. Members believe that there is no demand for this, I should like to quote from correspondence that I have received from the Elton Cop Dyeing Company, in my constituency. Mr. Herbert Hand, the managing director, recently wrote to me complaining about a circular that he had received from the Total oil company, informing him that the cost of heavy duty oil was to be increased by 1·20p per litre, to a price of 10p per litre. In January 1979, the cost to the company for that commodity was 4·79p per litre. Therefore there was an increase of over 100 per cent. in two years. The cost to the company this year will be £275,000 at the new price—an increase of £33,000.
This is a company in a hard-pressed sector of British industry—the textile sector. It has a modern finishing plant, with a high degree of automation. It has an excellent record for controlling costs. It has first-class industrial relations. But it cannot control the cost of oil, electricity, water, effluent and rates. Oil is now accounting for 14 per cent. of its costs, while its direct materials—dyestuffs and chemicals—are costing less than that.
The position is even more ludicrous when we consider that the company would now benefit—and would like to benefit—from conversion to coal. But, because of the increased cost of oil and its effect on cash flow, and the competitive edge of foreign competitors, with their subsidised energy, the company cannot generate the money it requires and is in a "Catch 22" situation. It is in circumstances such as these that the Government should act on behalf of this type of company.
The question of foreign competitors leads me to my final point, which concerns the paper and board industry. Last year, that industry closed a paper mill every 22 days. It closed a paper machine every eight days. It lost 24 men every day during 1980.
During 1980, the bad economic climate was compounded by the Government's policies, and it gave our competitors a 25 per cent. price advantage in the paper and board industry. Energy costs, without doubt, played a serious part in creating this disadvantage. The fact that energy is increasing in price is worrying to all of us, and to no industry more than the paper and board industry. The fact that energy is priced higher, in an energy-rich country such as ours, than in the countries of the majority of our competitors, is totally unnecessary and is a major disadvantage to our industry imposed on us by the Government.
Up to November 1980, heavy fuel oil in the United Kingdom cost up to 53 per cent. more than in most other countries—especially the United States of America and Canada. Industry has to pay between 6 per cent. and no less than 319 per cent. more than industry in other countries in Europe and North America for its natural gas.
We have to pay between 3 per cent. and 238 per cent. more than other countries in Europe and north America for our electricity. This country pays between 16 per cent. and 34 per cent. more for diesel than other EEC countries have to pay.
In this respect, the paper industry welcomes the NEDC initiative; indeed, paper was one of the major inputs into the NEDC study. But we need action and assistance now. The NEDC will not be receiving its next report until just before Budget day. Meanwhile, companies are daily at risk. We look now to the Chancellor of the Exchequer and to the Energy Ministers to alleviate our problems.
Those of us who are involved in the paper industry ask the Government for a freeze on all increases in energy prices for industry until those of our European competitors catch up with our prices. We ask that the energy subsidies of North America be declared to be unfair trading, and that appropriate tariff action be taken against them.
The Government must look again—the Minister referred to this—at the recent decision in the NEDC to agree to set up a task force on fuel costs. Is it true—I should like the Minister to deal with this question—that the task force has been given a remit only to compare EEC fuel costs with this country and not to bring into the comparisons the costs in Scandinavia and North America? The Minister seems to be confirming that by nodding his head. If that is so, the Energy Ministers are ignoring the disrupting force that is affecting much of British industry. They are ignoring the particular problems that Notth America and Scandinavia are creating in the paper industry and the textile industry. These problems are leading us along the road to disaster. We need firm action, and a comparison with costs in those countries should be included in the work of the task force.
If the Minister is not to be regarded as a twentieth-century Nero, he needs to stop fiddling and to take some action now.

Mr. David Crouch: The hon. Member for Bury and Radcliffe (Mr. White) declared a double interest. As the House knows, I have an interest in the chemical industry and also in the oil and gas industries.
The hon. Member for Bury and Radcliffe expressed his concern flir the paper industry. My principal concern in speaking this afternoon arises from a representation made to me by a very profitable paper mill in my constituency. Out of an annual output of £13 million it exports £8


million. That company asked me to do something about the rise in the price of gas. This price rise has come not from the oil industry but from the British Gas Corporation. The company has had a rise in the price of gas for this year—I pause for effect—of 47 per cent. That is the increase from one year to another. I became very concerned about the prospects for industry under the weight burden of such remarkable changes in price from one year to the other. I can hardly believe my ears, and I have spent a lifetime in the chemical industry.
Listening to the speech of the right hon. Member for Leeds, South (Mr. Rees) this afternoon, I felt that he was in some way unsure of his ground. He reminded me of a dismounted cavalry general who suddenly found himself in a major staff appointment—he did not like it, he was restless, and he wanted to get out into the field again. I thought that perhaps he had not given as much study to this vital question as he would have liked to give, but perhaps there are other things on his mind as he approaches this weekend. Just as I thought of the right hon. Member for Leeds, South as finding himself in a staff appointment and not liking it, dare I say also that my right hon. Friend the Secretary of State for Energy sometimes gives the impression of being a staff officer who does not give the greatest weight to the opinions of those of his field officers who are fighting the battle on the industrial front? I make those comments out of respect for each of the right hon. Gentlemen that I have mentioned.
I welcome the Government's decision that there should be an urgent inquiry into the cost of energy to British industry and to see whether British industry is being seriously disadvantaged by our present pricing policies. By their decision the Government have acknowledged that there is a case to answer. The establishment of an energy task force in the NEDC—which has been asked to report in six weeks—shows that the Government appreciate the urgency with which the problem must be investigated and resolved. I hope that its findings will be published in time, so that any fiscal measures that may be recommended can be acted upon by the Chancellor of the Exchequer in his Budget.
It has taken a long and very determined siege of the Department of Energy by the CBI, the Chemical Industries Association, and other industries in the intensive energy-consuming fields, to get this inquiry. They have had to batter at the doors for it.
We do not merely want interesting thoughts from the task force on the problem that it studies, because there is an urgent need for it to point to areas of action. It will need to be both specific and courageous.
There is no doubt that, to say the least, energy's present price structure for our industry is out of line with that of the rest of the world. British industry is paying through the nose for its energy. We pay much more than our industrial competitors on the other side of the Channel. As a result, we are losing business, and losing it fast. Foreign competitors have not been slow to jump into our established markets. As a result of their lower prices they take business from us. Manufacturers in France, West Germany, the Netherlands and Switzerland have led the way. Who can blame them? They have seen our weakness and have seized their chance.
I shall not weary the House with a long catalogue of price comparisons. They are well known in general, and

well known in particular by the Government. Too often, the Department of Energy has brushed them aside. The Department has given the impression of having a self-righteous approach to industry's complaints. That has proved irritating during a trying time for British industry.
Early this month the price of heavy fuel oil in the United Kingdom, excluding tax, was reported in the EEC oil bulletin as being $202 per tonne. Early this month the average price in the EEC was $212 per tonne. There would appear to be a slight advantage to Britain, which has a slightly lower price. However, there is a tax differential between the United Kingdom and the EEC countries of $12 per tonne. As a result, the United Kingdom is at a slight disadvantage. United Kingdom oil prices have just been increased by 13 per cent., which is equivalent to about $26 per tonne. Consequently, our prices are far higher than the EEC spot price.
The position is much worse in relation to natural gas. In the United Kingdom the price of gas for a firm contract is between 29p and 29·5p per therm. In West Germany the price is between 19·7p and 21p per therm. In France it is 19·5p. For interruptable supplies in the United Kingdom there is a slightly lower price, of between 24·5p and 25·5p per therm. In October 1980 the price in Belgium for such supplies was 17·5p and in Italy 18p per therm. Such figures led and still lead to a demand for an inquiry.
In recent months both the House and the public have complained that British industry is failing or having to struggle because of a variety of problems that could or should be corrected. Sometimes we have said that high wage costs have crippled our competitiveness. We have blamed management for inadequate investment and a failure to replace old plant and machine tools. We have said that productivity in British industry is too low. We have even heard business men—big and small—complain about the high cost of money and blame it for their uncompetitive position. British exporters had to jump a final hurdle in the industrial pentathlon, namely, the overvalued pound. They had to get over that hurdle before they could get into the market in Europe that we used to call the Common Market.
With remarkable stoicism British business men have accepted such restraints, but not without complaints, bankruptcies, many closures, and an increasing number of lay-offs. They have accepted such restraints because they have accepted and still accept the paramount need dramatically to reduce the rate of inflation. The time will come when there will have to be some amelioration of the financial pressures on industry. We must be very near that time.
We should be careful not to push industry too far. When a company falls, it finds it more difficult than it used to to recover lost business. When businesses fall and try to recover they are likely to find that their business has been taken by a foreign competitor. Business men know the danger and try to hold on to their export business at all costs. They do so by marginal costing, by selling at low profits, or by selling at a loss. They cannot go on like that for long. When they find that a major element in their costs—an element that is dependent on Government policy—is the artificially high price of energy in Britain compared with the prices found in other EEC countries, it sticks in their gullets.
Why should Britain, which is self-sufficient in coal, oil and gas, find itself priced out of the market? It is not the result of free market forces; far from it. It is the result of


Government intervention. I understand the Government's strategic aim for energy. The Government say that we must think of the future. They say that we are running out of gas and oil and must not burn them up too fast. We must make them last as long as possible. Meanwhile, we must strive to find the best options. Therefore, the Government argue that we must raise the price in order to restrict demand. Such a policy would be all right in an ideal world, where everyone did the same thing, but we are not in an ideal world, and everyone is not doing the same thing. In the EEC there is no harmonisation on energy prices; far from it. Our European partners must be laughing at our high-minded policy. Their manufacturers are cashing in on it.
The Government of the United States of America make no bones about it. They have deliberately held down oil prices to their industrial manufacturers. They have encouraged them to jump into the export markets of the world with a major price advantage. What does the EEC Commission have to say? It has quite a lot to say. A Commission statement that was issued a few months ago says:
Progress towards a Community energy policy is hampered today by wide national variations on pricing and fuel tax
The Commission states that consumers will have to face "higher realistic prices."
In an even more controversial passage, the Commission makes the following suggestion:
an effort should be made to harmonise national taxation and domestic energy price systems.
It mentions present differences and states that they were:
the root cause of a number of problems such as the deflection of trade between member countries.
Amen to that.
The world energy problem and its solution is the major issue facing the world. It involves all nations of the industrialised world and the Third world. We should give this subject top priority. It should certainly have top priority within the EEC. If we cannot agree among ourselves, what hope exists of trying to persuade or to bring pressure to bear on the United States or the OPEC countries? Could we even pretend to help Third world countries?
Let us not lose our strategic objectives. Let us give a lead in Europe. Let us take a world stance in the energy crisis. Let us also remember, however, that we have to stay alive industrially in a world grown tougher in competition than at any time in history. We must not neglect the immediate tactical problems that we face at home. We should not seek to exploit our partners and allies as a result of our energy-rich base. We have not done so yet. I am not suggesting that we should do so now.
My complaint is that our energy policy is a mixture of high endeavour and low experience—low experience of the facts of life in industrial Britain today. I am not so worried about our energy base. I am more concerned that our industrial lines of communication should not be broken and that our industrial front line should not be outflanked in the battle that we are fighting to keep alive. We have to win at least our share of that battle. Then, perhaps, we can lead the way to winning the war.

Mr. Peter Hardy: If I have to disagree at all with the hon. Member for Canterbury (Mr. Crouch), my only regret is over the timing of his speech. I wish that he had made it six months ago—or, better still, 12 months

ago. The hon. Gentleman told the House that British business has been stoical. I prefer to regard it as meek. The New Testament may say that the meek are blessed and will inherit the earth, British business men, however will not inherit very much if present policies persist.
Reference has been made to the paper industry. As a country that is 91 per cent. dependent on imported timber we are now in the ridiculous position of exporting raw timber to buy back paper and other timber products from other parts of the world where energy policies are pursued rather more sanely.
I agree with the Secretary of State that this is an important debate. My right hon. Friend the Member for Leeds, South (Mr. Rees) suggested that we need regular opportunities of this kind. As energy will be a vital problem for the rest of the century, it would be a good idea if the House arranged regular opportunities to discuss matters of current energy concern. At the moment we could consider the gas-gathering pipeline to which my right hon. Friend referred. It is a pity that we did not debate this issue before Christmas rather than being presented with a written answer. I would like to have heard the views of my hon. Friend the Member for Dunfermline (Mr. Douglas) before the new year.

Mr. Douglas: I did discuss the matter.

Mr. Hardy: My hon. Friend has done so, but he did not have the opportunity that should have been accorded him at the time.
We should be able to debate our concern over conservation and energy pricing. I hope to mention those matters briefly, but the main concern of Opposition Members at this time must be the mining industry. The Minister should know that there is no record of opposition to proposed closures where pits are exhausted. In my constituency in the last few years the Barley Hall and New Stubbin collieries have been closed without causing anything other than anxiety about what would happen to the people there.
There is concern, however, about the proposed closure of Orgreave colliery, which has reserves. I recognise that there is an argument on the question whether those reserves, under the area of Aughton, where it is wet, should be mined. There cannot be argument that coal exists under the Tinsley marshalling yard, which is to be closed. We shall therefore lose a rail link as well as the coal underneath it. The closure of that pit should be approached with a great deal more caution than has so far been shown.
The Minister should be aware that anxiety and anger in the coalfield is not restricted to one organisation. The National Union of Mineworkers is rightly concerned. I know that management is also worried. I spoke yesterday to leaders of the Yorkshire area of the National Association of Colliery Overmen, Deputies and Shotfirers, one of the most responsible trade unions in the country. They are extremely anxious. They want me to make it clear that they will resist proposals to close collieries other than on the ground of exhaustion. If a pit with reserves is closed, the opportunity presented by those reserves is locked away permanently and will never be realised.
We hear rumours of the possible closure of between 15 and 25, or more, collieries, on the ground not of exhaustion but of short-term economic considerations. We should express not merely our anxiety but our anger. The


Government should know that if 25 pits are closed the cost of the unemployment that will directly result from the closures will amount to at least £140 million a year. It would be far better to keep people in employment than to incur the greater cost resulting from the wastefulness of an unnnecessary closure.
Less than a year ago Opposition Members warned the Government of the consequences of recession and particularly of the likely vicious effect of the Coal Industry Bill. We are now seeing the conditions that we said would result a year earlier than we forecast at that time. It is foolish to allow what may amount to over 8 million tons of coal to be imported in 1981 when pits with coal beneath them are closed in the same period. It is right to point out to the Minister that 8 million tons of coal imported means an unemployment cost in this country, in 1981–1982, of £80 million. Importing coal at that level is a very bad bargain.
The problem is that the National Coal Board is expected to break even. The board is also expected to maintain capacity, as well as its research and its ability to provide the oil, gas and feedstock that will be needed from coal in the 1990s. If the board is threatened today, this will destroy its capacity to meet the national need in 10 or 15 years' time. This is a fundamental consideration, which should be overrriding. It has not been given adequate recognition by the Government. Four years ago I suggested to the then Secretary of State for Energy and to the chairman of the National Coal Board that it would be worth their while to seek to increase the level of exports to Europe. At the time Sir Derek Ezra took the view that such exports would attract loss. That may have been the case, although just afterwards the Community introduced the coking coal intra-Community subsidy, which would have eased the burden.
A situation occured in my constituency that will compel the very proposal that I made, but in extremely unfortunate circumstances. Just before Christmas I was astonished to learn that in his proposals for the steel industry Mr. MacGregor proposed the earliest possible closure of the Brookhouse and Orgreave coking plants, in my constituency. I had not anticipated that development at the time. I began deep consultations. I visited the works and met management and unions. I discovered that the British Steel Corporation had apparently forgotten that the Orgreave coking plant provided gas for the Sheffield steel industry and that there was no immediate alternative source of supply.
Mr. MacGregor may wish to obtain North Sea gas for the Sheffield steel industry. As private owners, domestic occupiers and other industrial units in my constituency have been refused North Sea gas, I shall resist strongly and object strenuously to any proposal that renders my constituents unemployed in order to provide North Sea gas for the Sheffield steel industry. A good, sensible and viable plant already provides that gas. When North Sea gas runs out we shall need another plant in our area to provide the gas to replace it. That seems an odd situation.
I wrote to Mr. MacGregor about these things. I was rather saddened by his reply, because I always took the view that as he was able to demonstrate a remarkable ability to look after himself he might be able to demonstrate a remarkable ability to look after the steel

industry. However, he replied saying that he did not think that it would be helpful to the National Coal Board to encourage or help it to keep open uneconomic pits.
We must ask ourselves, what is an uneconomic pit? In the successful collieries in my constituency the vast majority of those mining the Swallowwood seam occasionally run into difficulties with the roof at the coalface. The seam is notorious for roofing conditions; nevertheless it is a very good quality coal. But if a pit happens to have difficult roofing conditions for three months or six months, shall we have Sir Derek Ezra, Mr. MacGregor or a Minister from the Department of Energy saying "That pit is uneconomic. Let us close it"?
I believe that we are making too short-term a calculation in this matter. It may be all very well for the Minister to say to the NCB "Tighten up your finances, manage your accounting, improve your practices, and be economic in your arrangements," but what we are seeing now is not an insistence upon efficiency. We are telling the NCB not merely to trim its nails but to trim them by amputation at the elbow. That is the development that seems to be beginning.
In the last 12 months we have heard repeated calls for improved production. The coal industry has provided that productivity. Over the years during which I have been a Member we have heard repeated calls for far better attendance in the mining industry. In the last two years, as the Minister knows, absenteeism has been halved. We have heard calls for British workers generally to improve their arrangements to co-operate and to work hard. In my constituency the coal miners and steel workers have been doing that for a long time. In steel we have seen a very poor reward. For example, partly because of the ridiculous energy pricing faced by the record breaking special steels industry in South Yorkshire, we are priced out of markets in which we were previously massively competitive. The result has been that activity has been reduced and demand for energy has fallen.
Therefore, instead of supporting the use of our energy, in which we have a massive international advantage, and instead of encouraging competition and sustaining activity, we now see, at regular intervals, further burdens being placed upon business. I do not differentiate between those in the private sector and those in the public sector. I do not think that the hon. Member for Canterbury was differentiating between them, either. Each one of those groups in a wide variety of industries, and certainly the industries of South Yorkshire, is finding as each month passes that it is more and more difficult to survive.
If we are to have additional unemployment above and beyond the 15 per cent. or 20 per cent. that many South Yorkshire areas are currently experiencing we shall not see merely a great waste of money but a greater anger. The Minister knows that in the 1960s the miners and mining communities were quite tame in their acceptance of a policy of contraction. But they learnt in the 1970s that the arguments that they advanced about the folly of closing pits in the 1960s were right and justified. They will not accept a repetition of the history of the 1960s by exhibiting the tame docility that was expressed at that time. The Minister must not expect docility in this situation. He will not receive it.
Whilst I do not believe in violent demonstrations and responses of that kind to political arguments, I would join those in my constituency who would rather see public money spent in keeping people in successful production


than see it spent in paying them, their children and their grandchildren to waste their time on the dole. We do not want that situation. It is avoidable. It is easier and less costly to avoid that than it is to adopt the alternative. I beg the Government to listen to the voices not merely of the economists who may be employed in No. 10 Downing Street but of those who have long been concerned about the need to make industry successful in all our areas, and certainly to retain the necessary industrial activity in coal and steel.

Mr. Patrick McNair-Wilson: Like other hon. Members. I welcome the right hon. Member for Leeds, South (Mr. Rees) to his new Front Bench job. However, I remind him and the hon. Member for Rother Valley (Mr. Hardy) that we on the Conservative Benches do not need lectures from the Opposition on energy policy. It was their policy, particularly in the 1960s, that led to the Coal Industry Act 1965—which some say tore the heart out of the industry—and to the 1967 White Paper, which carried such engaging comments as:
This reinforces the case for continuing to accept a degree of risk with oil supplies for those markets which it retains, so that we may benefit from its cheapness".
The Labour Party is the party that is now lecturing the present Government on their energy policy. It is a party that has a very poor record of achievement when in office.
The right hon. Member for Leeds, South is reading himself into his new job. As he does so I hope that he will take an early opportunity to look at the Coal Industry Act 1965—before he tells the present Government what they should be doing.

Mr. Albert Roberts: The hon. Gentleman ought to have a better memory. He should go back to 1957, when we were stocking coal at 10s a ton. We are now stocking coal which is deteriorating in value, and with the crisis stock of 38 million tonnes, hordes of people are shivering in their homes.

Mr. McNair-Wilson: The hon. Gentleman will recall that Lord Robens always said that if the coal production figure fell below 200 million tonnes, the industry could not be kept together. Many of these figures have now, regrettably, passed into history. All that I am saying to Labour Members is that no one has a monopoly of all the wisdom in terms of energy policy.
I urge my hon. Friend the Under-Secretary to press on with all speed with the review of prices. I do not believe that we should be aiming to return to a cheap energy policy, because if we do that the miners' wages will reflect it. However, I want to see that we get as near fair competition as possible. I hope that my hon. Friend will recognise that as sterling increases in value so, inevitably, the difficulties for manufacturing industry become that much worse.
I do not want to spend any time on the coal industry this evening because I made my views on the current situation clear on the Second Reading of the Coal Industry Bill, now the Act of 1980. However, I ask this question of my hon. Friend: if British coal is supposed to be as competitive as we are told it is, and if we are now part of an effective, expanding Common Market, what attitudes are being struck by the European coal cartel? If European countries such as France and Germany want to share in our oil, they

should take our coal to burn in their power stations. I should have thought that that was a perfectly reasonable deal that we could put to our colleagues.
I very much hope that now that there has been a change of emphasis in Poland—one of the cheapest suppliers of coal to the North German power stations and elsewhere—we shall take advantage of that change and try to push our export market a litle more strongly.
I declare my interest, in that I am employed by a company that makes graphite products. That interest will become clearer in a moment. I begin my remarks by asking my hon. Friend whether he could help me with a constituency problem. I share the view expressed by the Secretary of State about the looming oil crisis. I think that the present situation, when there appears to be a glut, will soon give way to a situation of shortage, worry and all the other things to which my right hon. Friend referred. Therefore it makes sense for us to determine as quickly as we can the extent of our indigenous resources.
My hon. Friend the Under-Secretary will know that many parts of the South of England have been set aside for exploration. My constituency is one of them, Shell Exploration has plans to drill an exploration well of about 6,000 ft to determine whether there is oil there. When it is put in, that application will be decided on and determined by the county council.
Accepting that the New Forest is a somewhat unusual area of natural beauty—if oil is found there, or in the national parks and other areas of outstanding natural beauty, can my hon. Friend give an assurance that we shall be able to have the same type of full open public planning inquiry as those that took place at Belvoir and Windscale? In an area of environmental importance it would only be reasonable to have such a planning inquiry—

Mr. Skeet: There is a difference in size.

Mr. McNair Wilson: —despite what my hon. Friend the Member for Bedford (Mr. Skeet) says. My main point relates to electricity. Electricity takes about 30 per cent. of all the fuel that we burn. It has certain applications where there is clearly no competition. Therefore, the method of generating electricity must be of central priority to any discussion on energy policy.
I firmly believe that in energy terms, in 15 to 20 years' time we will effectively be talking about coal and nuclear energy, with oil perhaps being reserved more and more for transportation, coal taking on a whole new range of activities, and nuclear energy beginning to take up the base load for electricity generation.
It has already been proved, at least to my satisfaction, that the nuclear power generating systems operating in this country are very safe. There have been no fatal accidents in nuclear power stations from nuclear causes. However, argument continues on the question how best electricity should be generated by nuclear means. If we are to understand that problem we must recognise that we are talking only about a nuclear furnace. It may be a coal furnace or an oil-fired station. It is a device to boil water to drive a turbine.
Over the years there has been much discussion of the different systems that can be employed. In the 1950s this country led the world in nuclear generation technology. We opted to go for gas-cooled technology. In almost every respect it has proved that its performance capability is excellent. It has shown a fine safety record, and it enjoys the distinction of being British technology.
Under the Labour Government there was an attempt to find an alternative. The heavy water option was examined at great cost. It is an option that I have always found it difficult to understand, since we have no heavy water plant. Nevertheless, the steam generating heavy water reactor option has now closed. We are once again being asked to re-examine the pressurised water reactor. This system, according to its proponents, has many advantages, one of which is that it is an off-the-shelf form of generation. They say that it has a lower overall cost, and that if we were to opt for PWR we would begin to enjoy the opportunities of exporting the stations.
I do not accept any of those arguments in favour of PWR. Although many of the AGRs have turned out to be more costly and have taken longer to build than was expected, if we are to build PWR stations to the safety standards that we must insist on we shall not find that we automatically have an off-the-shelf, cheap form of electricity generation. The early stations—the Magnox stations—are still, after all these years, turning out electricity as cheaply and efficiently as predicted—in many cases more so. We would be making a big mistake if we wasted another mass of taxpayers' money on examining the opportunities of placing orders for PWRs when we already have our own thermal reactors, which work perfectly well.
We should now recognise that we have come to the end of the thermal programme as we know it. To waste further money on new designs at this stage would not be sensible. We should give urgent consideration to using the fast reactor.
In 1959, the first Dounreay reactor—the small one—was brought into being. It has performed magnificently since then. In 1974, the prototype reactor—the larger demonstration model—was brought on stream. That is doing likewise.
The fast breeder reactor has the advantage of a better utilisation of fuel—let us remember that uranium is just as finite as oil—and also has the advantage of being more efficient. Today, we should be making active plans for a commercial fast breeder reactor. If we do not, we shall be overtaken by our European colleagues. We shall find that when the shortages to which I referred earlier come upon us we shall still be very much in the second league.
What time scale do the Government see for the building of a commercial fast reactor? Any energy policy for a period between now and the end of the century that does not include, for this country, the development of this technology will mean that Britain will have missed a magnificent opportunity to take advantage of her own technology. It is an opportunity that we cannot afford to miss.

Mr. David Penhaligon: We have heard some interesting speeches, with some of which I would concur and with some of which I would not.
The hon. Member for Canterbury (Mr. Crouch) said much with which I agree, although he has clearly met different business people from those that I have met. The business people in my constituency who have gone bankrupt see their life's work in shreds, as they have had to sack people who have worked for them for 20, 30 or 40

years. They have not said that that is their contribution to fighting inflation. There are more generous industrialists in the hon. Member's constituency than there are in mine.
The theme of the hon. Gentleman's speech was very interesting, and I should like to continue part of it. The single most important contribution that energy has made to the British economy in the past five or six years is the effect of North Sea oil on our exchange rate. That is the major reason why Britain is in such difficulties on the job front.
The Government slavishly follow each OPEC rise, which has three effects. First, it substantially increases Government revenue. Secondly, it pushes up the international value of the pound, as those countries that are not self-sufficient in oil can see that the gap between the real production costs of oil and the price at which it is being sold is, for Britain, increasing. The third effect, not long after the other two, is that every OPEC price rise makes our industry substantially less competitive with other countries because of the effect on the pound.
The Government say—it seems a nice, simple, pat answer—that this all produces a great deal of revenue, which they will use to reduce the taxation of companies and the profits of our industrial enterprises. I have not seen the most recent figures, but the profits of our industrial enterprises are going through the floor. That is why they are closing. The hint that the Government might reduce the tax on the profits of a company which has just gone to the wall is an extremely cruel joke.
In any case, it could be argued that the contribution that industry makes to the Government by way of taxes on profits has gone through the floor in the last 20 years anyway. I do not know what percentage of Government revenue comes from taxation on profits today, but it is a fraction of what it was 20 years ago.
The Government have two options. The first is not to follow OPEC. I strongly refute the claim that this option would be a subsidy. A policy of subsidy means selling something for less than it costs to produce. North Sea oil production costs $4 a barrel—perhaps $6—which is so much less than the current price that we are not, by a mile, talking about a subsidy. If we had a lower internal oil price in the United Kingdom than those of other European countries that would not be a subsidy.
The Government's second option is to put each increase in revenue that they receive from an OPEC price rise into a separate fund to compensate industry for the difficulties caused by that price rise. It could be used to reduce payroll tax or to provide major investment grants to industry.
The choice between those two options is marginal. I do not worry which one the Government pursue. All I pray them to do, while we still have some industry left, is to pursue one of them.

Mr. Skeet: Will the hon. Gentleman take into consideration the fact that if BNOC reduced the price below $39·25 to assist British industry we would have to sell the oil to the Europeans at that same lower price? Surely that would be a great disadvantage.

Mr. Penhaligon: It remains to be proved that that is what we would have to do. I have offered two options. At the moment, we sell oil to Germany, where it is passed on to industry at a lower price than the price charged to our industry. There can be no rationale in that. As things stand I cannot agree that my suggested alternative is impossible.
Nuclear power has had scant attention tonight. Yet the Government's projected expenditure on their newer nuclear building programme is between £12,000 million and £15,000 million. Such a sum deserves a day's debate in itself. One of the major functions of the House, if it has any real purpose at all, is closely to examine Government expenditure plans. For the Government to slip through such a sum as this without using any of the time available to them for debate is a disgrace.
The public perceive this building programme as representing a substantial risk. I am by training a professional engineer and I must tell the House that I find it difficult to quantify the risks. The Three Mile Island incident, some say, proves that the risks are small. Others say—I would be in this camp—that we were so near a desperate and monumental accident at Three Mile Island that it is a warning written on the wall for all of us.
As a Member for a rural seat, I am amazed that the Government should claim to have confidence in nuclear power stations while still insisting on building them in remote areas. On the day that they have the courage to build one in London, my constituents in the far South-West will be more impressed with their safety. Correspondence with the Government clearly shows that the real reason why these stations are built in areas with sparse population is that, if—I do not over-emphasise the "if"—there were an accident, evacuation would be much easier than in urban areas. That is not exactly an admission which will greatly increase confidence in an area where Governments have spent no other money at all yet which they suddenly wish to bless with a nuclear power station costing £1,000 million.

Mr. Palmer: I hope that the hon. Gentleman is aware that there are three nuclear stations within easy reach of Bristol. Does he think that we are in danger?

Mr. Penhaligon: Candidly, yes. As I have said, I find it difficult to quantify the risks, but if an accident should occur on any of those sites, the good people of Bristol are at risk. They are less at risk than the people in some of the villages in my constituency are from the possible nuclear power station in their area, because those in Bristol at least have the advantage of a few miles between them and a nearby station, but the risk undoubtedly exists.
I have some questions about the PWR inquiry. When will it start? What will be the terms of reference? Will the Government fund or help to fund those who want to use the inquiry to present an alternative case?
I say this with no malice, but if the public perceive those arguing against the PWR to be less well funded and less able, because of lack of money, to present their arguments than those arguing for it, they will take no notice of the inquiry's report. What are the Government doing to ensure that those with doubts about the PWR are not restricted by lack of money from fully and articulately presenting their case?
If the inquiry decides that it is no go—that the PWR is not safe enough—what will happen to all the sites in Britain which are currently being investigated for PWR stations if the system is approved? Do the Government intend simply to go back to AGRs and to build them on the sites?
Conservation also has had scant attention tonight. I believe that 10 or 20 per cent. of our energy could be saved

by a massive conservation programme. Insulation, draught proofing and more efficient machines all come immediately to mind.
A particular interest of mine is district heating systems. I hope that the Minister will let the House know where we are in this saga. I see faces around me that are familiar in energy debates. I do not know how many times hon. Members have raised the subject of district heating schemes, but their potential is enormous.
The average thermal efficiency of British power stations is not more than about one-third. Until a new generation of materials can be discovered, that figure is not likely to increase. We use one-third of our energy to produce electricity and waste two-thirds to heat rivers, birds and fish. If we could save only one-half of the two-thirds that we waste, the contribution of useful energy to Britain's energy supplies would be equivalent to the total current output of the Central Electricity Generating Board. We shall take a long time to reach such a day, but I should like to see the Government start on the plan to establish massive district heating schemes.

Mr. Edwin Wainwright: My purpose is to keep the debate as wide as possible, but as I represent the coal industry I hope that the House will forgive me if I dwell on that industry.
I am sorry that the hon. Member for New Forest (Mr. McNair-Wilson) has left the Chamber. He spoke about nuclear power, which is still a comparatively new industry. We are not yet aware of all its dangers. Throughout the world, especially after the Three Mile Island incident, people are afraid of the dangers that may arise from the burning down of the core. There must be ways of controlling nuclear power and making it safe for the future.
We must not move too easily and too quickly, especially with the fast breeder reactor, because that could leave in its wake great dangers to mankind for a long time. I hope that before the Government do anything about the fast breeder reactor and the siting of any pressurised water reactor they will call a large public meeting to discuss where reactors should be sited and whether they should be allowed to proceed. We have heard a great deal about Three Mile Island. Some of us know that there was human error in the control room. Two panels were sited damned stupidly. They were at the back of the control panel and could not be seen. One of those panels was essential and should have been visible. If it had been, the operator would have been aware of what was happening and the danger could have been avoided. We have to ensure that operators in the control rooms of nuclear power stations are sufficiently well educated and professionally minded to deal with the problems. The Government must always be careful that the building and running of nuclear power stations are as safe as possible.
In the midst of social and industrial decline, our standards, like those of other developed nations, are bound to be affected. No sector of British industry can remain unaffected. That applies to the energy industries as well as to manufacturing industry and all forms of commerce. We must take into account the present economic climate and must prepare for the future, when, I hope, that climate becomes brighter and the economy starts soaring.
We are more fortunate than many other countries, because we are self-supporting in energy. I hope that we


do not become too complacent, because energy and energy prices are of great importance to our industry. We must prepare to use our energy supplies in the best possible way so that the self-supporting period may be extended beyond the estimates. It is estimated that our oil will last for two decades, coal for about 300 years and gas for four to five decades. By careful conservation we can extend those periods.
I shall confine the rest of my speech to the coal mining industry, because it is essential that we get that industry right. There is great danger in what may happen to the industry. What is to be done to keep energy costs to our industry similar to those charged to industry on the Continent? The costs of energy to our industry are far greater than those on the Continent, despite what is said.
Let us look at the subsidies to the coal mining industry. In Belgium the subsidy to the coal mining industry, though the industry is small, is £58 per tonne; in France it is £45 per tonne; in West Germany it is £41 per tonne; and in the United Kingdom it is £29 per tonne. Direct aid to productivity to the industry in Belgium is £207·7 million, costing £34·05 per tonne; in France it is £334·1 million, costing £17·96 per tonne; in West Germany it is £1,385·7 million, costing £14·85 per tonne and in the United Kingdom it is £195·4 million, costing £1·62 per tonne. We expect our coal mining industry to produce the coal as cheaply as coal is supplied on the Continent.
The income from North Sea oil should produce subsidies for the coal industry so that the cost of coal to our consumers is cheaper. Why should we import nearly 8 million tonnes of coal? Why do we allow that when we have coal here? I know that some of the imported coal is coking coal, but the NCB can satisfactorily blend our coal for our coke oven plants. We allow imported coal to come in because it is cheaper. I remember that we allowed oil to be imported, because we depended on oil. As a result, we nearly decimated our coal industry. All Governments were guilty because they allowed cheap oil to come in from OPEC countries. But we have been taught a lesson. The Secretary of State gave us a new price today. He said that there had been a 1,800 per cent. increase in the price of oil since 1973. That is a terrific increase.
I remember when we started to import coal from America shortly after the war. It was to be supplied to the NCB at a cheap rate, but as soon as the contracts were fixed the cost of transporting the coal went up and the NCB had to pay £70 million for that coal.
There has been low investment in the coal mining industry. We shall require coal when the oil has run out and we cannot close a pit and expect to recover in 10 years' time. It is essential to retain a coal mining industry.
I look forward to the day when we have co-ordination among our energy industries. One would expect such co-ordination if they were part of a multinational corporation, but the Government expect them to work separately, and their attitude is that if one industry is facing difficulties it should be allowed to lose. We cannot allow that, because the coal mining industry must be maintained to be able to produce the increased tonnages that we shall need in 20 or 30 years' time.
We must not allow market forces to operate in energy and industry generally. We have to cater for the needs of our people and we need to export large quantities of our goods in order to pay for imports. It is essential that we

make certain that our industries work as efficiently and productively as possible. The coal mining industry has done that. Miners have produced almost everything that has been asked of them, but because there is now a large stock of coal we hear talk of pit closures.
The Government will try to close pits, and that will cause conflict in the industry. We hear that the NCB plans to close 25 pits; but no evidence has been given to the NUM. Where is the co-ordination between the management and the union? Why is there no openness? Why do we have to rely on a mole leaking the fact that pits are to be closed? Even now, we have not been given the list, but everybody says that there is a list. It ought to be divulged to the miners.
The Govenment must make sure that their policies are wide and prudent enough to ensure that our energy industries work together and achieve greater co-ordination. We must not allow one to fall by the wayside when we know that in 20 or 30 years' time we shall have to build it up into perhaps the most important industry for the nation.
I hope that the Government will think more deeply about the future of the coal industry. If they carry on as we expect there is bound to be conflict. I fought in many struggles in my younger days. I have had a tough life fighting for the rights of miners, but if everybody works as he should in a nationalised industry and we make sure that we are planning with the best co-operative methods and co-ordination, strikes should not be necessary. The nation, workmen, and the whole economy lose when a strike takes place.
I hope that the Government will have second and third thoughts before allowing the National Coal Board to close any pits against the wishes of the NUM.

Mr. Geoffrey Johnson Smith: It is always a pleasure to follow the hon. Member for Dearne Valley (Mr. Wainwright), who speaks with great knowledge of the coal mining industry. His memory goes back a long way. He reminded us of the many battles that he has fought. Mine is not such a long memory and I have no personal experience of the coal industry.
However, having surveyed the scene at Westminster for a number of years, I think that there has never been a time when there was so much agreement between the two sides of the House about the value and long-term importance of the coal industry. We are all agreed about that. An Opposition Front Bench spokesman agreed on the radio this morning that the "Plan for Coal" published by the previous Government in 1974 was the policy of the present Government.
The hon. Member for Dearne Valley referred to subsidies. Of course Continental countries subsidise their small coal industries. The German coal industry is declining, and because the Germans depend so much on coal they have to get every scrap that they can. The picture in this country is entirely different. I hope that I am not looking at it through rose-tinted spectacles, but the hon. Gentleman knows that the Government have pledged to spend between £600 million and £800 million, not so much on subsidies as on investment for modernisation, so that we are able to compete with other fuels and have a prosperous coal industry.

Mr. Edwin Wainwright: The hon. Gentleman is saying things which he knows have not been accepted by


the NUM. He talks about investment, but what about investment in liquefaction? Has not that been neglected? Have we not lost coal because we have not spent the money needed to modernise more pits?
I know that there is a surplus of coal, but I remember—

Mr Speaker: Order. I am sure that the hon. Gentleman remembers, but he has already made his speech.

Mr. Johnson Smith: I shall not follow the hon. Member in too much detail, but there is a tremendous amount of investment in the coal industry. I do not know of any Government who have greater good will or could spend more money than the present Government, bearing in mind their responsibilities in other directions. The Government are trying to improve the investment record of the industry, and productivity is increasing. The industry suffers high cost elements, because there are many uneconomic pits still in existence. Any Government, even a Labour Government, would have to pay attention to the fact that such costs are uneconomic and that the industry must put its house in order. That is a discipline to which it, like any other industry, must be subjected.
My purpose is not so much to talk about the coal industry as to examine the relationship of energy prices to industry generally. I understand the difficulties that the Government got into with the CBI and other organisations in industry in respect of their energy pricing policy. It is generally agreed that, overall, our energy prices are not out of line with those of our competitors. However, there are problems, though they are difficult to quantify, and that is why the Government have agreed to sit down with the CBI and other interested parties—they were a bit slow about agreeing to do so, but I make no complaint about that—to discover in what areas we are out of line.
I am glad that during the past year the Government did not yield to the temptation artificially to hold down the prices of indigenous oil and gas. General subsidies for energy are bad for efficiency, for conservation and for innovation. We must carry the Opposition Front Bench on that point. I have not heard it argue that point. Subsidies only postpone the day when we shall be less dependent on the vulnerable oil supplies from that area of tremendous political instability, the Middle East. Surely that is agreed on both sides of the House. The Government's policy of market pricing for fuel is not simply an ideological aberration of a Right-wing Thatcher Government.
At the international Venice summit our friends and allies supported our policy and agreed on the need for Governments to ensure the market pricing of fuel. Equally, we all agreed that there should be some market stability. The sudden increases in the price of oil do not lie within our hands. The OPEC strategic committee said that that was not to its advantage either, but we have yet to have as good a track record from that committee as we should like to see. From time to time the various OPEC Governments seem not to follow the policy of their strategic committee. In those circumstances we shall need, on a European basis, to use every bit of muscle that we have to persuade the OPEC Governments that it is as much in their interest as it is in our interest and the world's interest to have a stable market.
I understand that there is no quarrel between British industry and the Government about the fundamental approach to what I believe is a sound energy policy. The

CBI is not asking for subsidies but, as my hon. Friend the Member for New Forest (Mr. McNair-Wilson) said, it is asking for fairness. That is right. We reject subsidies as a way out of our difficulties in an era which marks the end of cheap energy. That must mean that we reject the need for Government interference with the pricing policies of our nationalised fuel industries. They have been mucked about by Ministers for too long. That is one reason why the chairmen of nationalised fuel industries have a most unenviable task—and I do not refer only to fuel industries. How can we have a sustained policy if Governments yield to consumer pressures and interfere with the pricing and marketing policies of those who were set up by Parliament to run the industry as proper managers?

Mr. Allen McKay: Will the hon. Gentleman give way?

Mr. Johnson Smith: I would rather not, but I will.

Mr. McKay: The hon. Gentleman is missing the vital point about the coal industry. It has been in a position of under-investment from private enterprise for many years. Because various Governments have put money into the coal industry—for which we are grateful—it is now on the fringe of coming into its own. But the short period that the Government are giving it to achieve that will ruin the industry.

Mr. Johnson Smith: We can argue whether it is too short a period for the coal indstry to come into its own and make a profit, but it is not a matter of principle that divides us; it is only a matter of emphasis and timing. Given the general good will on both sides of the House towards this tremendously important industry, we should be sensible enough to agree on a timetable that suits most people. There will always be some who will argue that it is too fast or too slow, but I have never known any policy that does not attract that sort of argument. That is of no importance in the end.
If we reject price controls—and I am glad that the Government do so—it is not the same as saying that the British Government or British industry should reject ways and means to reduce energy costs and use. It is to that aspect of the Government's policy that I now turn. I see no point in paying more for energy than necessary, and thereby putting ourselves at a cost disadvantage compared with our competitors. There is evidence that that happens. It is clear that the tariff arrangements of the Central Electricity Generating Board are insufficiently flexible. I understand that that matter is under consideration. However, the facts have been known for some time. The Government were right to refer the electricity supply industry to the Monopolies and Mergers Commission. I hope that the Government's discussions with the CBI will speedily result in the conclusion that the power to be more flexible should be vested in the CEGB.
In general, the concept is that the CEGB may not offer a special favourable tariff to one customer in case that results in the placing of a burden on other customers—even if the CEGB regards the new load to be used by the new customer as ideal for its network. Because of that inflexible arrangement, the new intensive demand industries wanting special tariff arrangements that can be obtained in other countries are unable to obtain them in Britain, even though Britain has generating capacity lying


idle. In the United States there is competition between public power utilities to attract industries to a specific state.
If the Government think that it is wise to give money to industries in certain parts of Britain—for example, to help with start-up costs because the Government believe that it is important to encourage the expansion of new industries in certain areas and even, in some instances, to ensure their survival—surely the same holds good when trying to strengthen industries that depend on having power costs equal to those available to their competitors in Europe, Japan or North America.
There is nothing in the CEGB arrangements to convince me that we have that right. Similarly, there are other major processing and metallurgical industries that require gas either for energy or for chemical feed stock at the prices paid by international competitors. I understand that that is now beginning to happen. There should be some mechanism to make possible a more flexible tariff arrangement. That is one reason why our costs in some companies and industries have proved to be out of line with those in other countries.
The second reason why our energy costs are too high is that manufacturing industry does not have a good record in reducing energy costs. The figures since 1974 show that energy consumed per unit output by manufacturing industry has hardly altered. The Germans achieved a 17 per cent. improvement between 1974 and 1978. The Americans, whom we regard as squanderbugs in energy, achieved a 14 per cent. increase in efficiency; France achieved an increase of 9 per cent.; and the Japanese industrial energy efficiency rate improved by 10 per cent. between 1976 and 1978. Industry must put its house in order. It cannot expect the Government to help it with grants. If it knows that energy is costly it has every incentive to introduce the technology that is now available, based on the microchip, to improve its use of energy. I was once involved in trying to sell that. The conservatism of some managers in British industry was appalling. Some companies have a good record, but the remainder lag far behind.
The third reason why our costs are higher has much to do with the structure of British nationalised industries. The steel industry must take a leaf out of the book of the Japanese steel industry. That applies whether it is in private or public ownership. There is no ideological babble about that. We are talking sheer market economics. The great iron ore developments in Western Australia and other parts of the world to a large extent took place with Japanese purchasing contracts. Australia was one source, the development in Africa another, and there were many other sources all over the world. They went to the source of supply for their steel industries. If they could buy their way in they entered into a long-range purchase contract, which often included the sale of their steel goods. It was a good deal.
Following the second nationalisation of the British Steel Corporation, the British steel industry could have entered into joint ventures or partnerships to develop iron ore or—this is more delicate ground because some hon. Members represent coal constituencies—even to develop coking coal mines. That would have achieved a secure supply at a cost well below the world price. Yet it did nothing in that respect. British Steel's ability to offer

major long-term contracts to a new mining venture in which it wished to become a partner could have been financed not through the taxpayer but by bank loans to the new venture with only a modest equity investment from BSC. We now have a corporation, probably the largest single consumer of raw materials in Britain, without any integrated source of materials. I am informed that no other steel producer of comparable size, anywhere in the world, is so lucky in that respect. I doubt whether any steel producer anywhere else in the world has received and is continuing to receive so much assistance from the taxpayer. Something is wrong with the way that we capitalise on the advantages that should be available to us.
The Central Electricity Generating Board is another example of an industry which could have benefited from a mineral procurement policy, but I realise that that is delicate ground because it is virtually tied to coal. Therefore, I shall skate hastily over that thin ice in case I encourage interventions from hon. Members representing constituencies with coal interests. However, I think that the electricity industry could benefit from integrated supplies.
If it is delicate for the British Steel Corporation and the CEGB to enter into arrangements for investment in overseas sources of coal supplies, I can only say that I am somewhat disturbed that neither of these industries is as involved as I should like it to be in North Sea oil. Both industries are large consumers of oil.
The Government have encouraged a wide variety of companies—some of them unlikely companies—to participate in North Sea oil exploitation. I should have thought that it would do a great deal for the strength of these two national corporations, on which so much of our industrial well-being rests, if they were encouraged to take part in North Sea oil. I do not suggest that they should develop it. If they were given blocks, many people with the expertise would come in to do the development. But there is not much of a record of the BSC or the CEGB having access in that respect. If they were allocated favoured areas I believe that that would do a great deal to generate funds to help them to face the future with greater confidence.
Perhaps one of the first steps to which we should give greater attention in terms of energy resources is that those resources should become an integrated part of our overall industrial structure. Several hon. Members have either said or implied that our energy industries appear to be somewhat remote from national industrial strategy. Each seems to be concerned with its own affairs.
No one knows from one year to the next—or from one miners' conference to another, because that has a significant effect—what the price of coal will be. No one can be sure what the price of oil will be, because that is generally set by OPEC. Gas follows in train, because that is related to oil prices. Then along comes electricity in the rear, following willy-nilly according to what prices the industry's fuel suppliers charge.
If we were able to develop an energy-industrial strategy that aimed at creating the greatest overall added value from the conversion of energy to competitive industrial products we should obtain the maximum benefit from our energy sources. We would then be concerned not with what prices we could get for coal, oil or gas, per se, but with the benefits that the nation could achieve by using those


energy sources, combined with an imaginative and long-overdue raw materials procurement policy, to make our industries more competitive—in fact, the most competitive in Europe.
In making these comments, I draw heavily on the views expressed to me over some weeks by a constituent who has a deep and long-term knowledge of materials procurement in a well-known international company. As hon. Members know, I take a very keen interest in energy problems. Therefore, I hope that the Government will comment on my suggestions.

Mr. Harold McCusker: When I spoke in an energy debate last year, I said that Members of Parliament representing Northern Ireland constituencies contributing to debates such as this could be likened to underprivileged children with their noses pressed against the window of a wealthy neighbour's house admiring the fire in the hearth, because it is cheaper to have a fire in the hearth in any region of Great Britain than in Northern Ireland: envying the gas-fired central heating, because gas in Northern Ireland costs four times more than in the rest of the United Kingdom; and wondering at the galaxy of electrical appliances, because electricity in Northern Ireland costs 25 per cent. more than in the United Kingdom in general. If anyone disputes those figures, I should point out that they are to be found in the columns of Hansard, having been given by the Minister of State, Northern Ireland Office. I ask hon. Members to add those figures to the figures that have already been given when they talk of the consequences for their constituents of the energy crisis that faces us.
I shall not bore the House with the catalogue of underprivilege which is suffered in Northern Ireland and is reiterated almost every week in this Chamber. However, I propose to emphasise the disadvantages experienced by those in Northern Ireland because there is no coherent energy policy for the whole of the United Kingdom.
This Government, and to a lesser extent their predecessors—who in their latter days were beginning to move towards a common energy policy for the whole of the United Kingdom—appear to want two energy policies for the United Kingdom; one for Great Britain and one for Northern Ireland. One, of course, is 40 times bigger than the other. One has all the natural resources; the other has none.
If Northern Ireland had all the natural resources there would be no problem. I would support the Government in exploiting and using those natural resources for the benefit of the whole kingdom, just as the Government are doing with what can be urged to be Scotland's natural resources. The consequence of Government policy, which I described in my opening comments, is inevitable. The part of the United Kingdom which can least afford it is being asked to pay the maximum for its energy. It is impossible for Northern Ireland any longer to have a viable and separate energy policy. That might have been possible when Stormont existed. I am sure that many former Ministers in the last Stormont Administration were relieved that it was prorogued in 1972, because it almost coincided with the 1,800 per cent. increase in the cost of oil. Today they would be faced with the problem of trying to explain to the people of Northern Ireland why they were having to pay exorbitant rates for their electricity. Indeed, they could not have done anything to change that situation.
Recently, at some political disadvantage to myself, I worked very hard to co-ordinate energy resources on the whole island of Ireland, and to see that they were shared. The dangers inherent in the isolation of the Irish Republic are best seen in its approaches to the Department of Energy here to obtain a link with the United Kingdom system or, as the Republic would argue, the greater European system.
Northern Ireland is underprivileged in another way. This is the Parliament of the whole United Kingdom, from which operate the Government of the whole United Kingdom, and sitting on the Government Front Bench is the Secretary of State for Energy of the whole United Kingdom. I am allowed to speak in the debate and to vote tonight. However, I am a second-class Member of Parliament because I shall not get a response to my remarks. I shall be told by the Minister, whom I hold responsible for energy policy for the whole United Kingdom, that he is not responsible for energy policy in Northern Ireland. That is scandalous. I wish that hon. Members on both sides of the House who were so devoted to the cause of devolution were here to experience it. It is very frustrating. I hope that the Secretary of State will change his mind, but I have no doubt that he will say what was said last time—that he cannot make any comments about energy policy for Northern Ireland because it is a matter for the Secretary of State for Northern Ireland. Nevertheless, having said that, perhaps he will think again.
This deplorable situation arises not because of the disparity in domestic energy prices between one region and another in the United Kingdom but because of the crippling effects of the differentials in industrial and commercial tariffs.
There is one difference between the situation now and the situation eight months ago. Eight months ago, when I first spoke on the subject, 60,000 people were unemployed in Northern Ireland; now there are 100,000. We are told that during the next 12 months the figure will rise to 125,000. Yet, with unemployment totals in Northern Ireland rising to 20 per cent. and above, light engineering tariffs in the Province are 34 per cent. higher than in the North-East of England—a comparable region. Commercial tariffs in Northern Ireland are 32 per cent. higher than in the North-East of England. Heavy engineering tariffs in Northern Ireland are also about 30 per cent. higher than in a comparable region of the United Kingdom. Northern Ireland has the worst unemployment rate. With that penalty on top of the other penalties which have been described earlier today, I do not know how some of our industries manage to survive. For that reason alone I shall support the Opposition motion tonight, as, I am sure, will my colleagues. We believe that the United Kingdom needs an overall energy policy which includes Northern Ireland. The Province must become another electricity or gas region within the appropriate United Kingdom structure. That is the only way to reduce the unacceptable differentials which currently exist.
The last Government, in equally difficult times, did a lot to help. The former Secretary of State for Northern Ireland—the right hon. Member for Barnsley (Mr. Mason)—obtained£350 million from the Treasury in an attempt to put Northern Ireland's electricity industry on its feet. Let me put that £350 million into perspective; it is equivalent to the total cost of terrorist damage done in Northern Ireland up to the date on which that money was obtained.
I believe that the previous Government were about to take the steps that we have now suggested. The process must begin with the construction of electricity and gas interconnectors across the North Channel. That is not a Unionist political ploy. In fact, the Government of the Irish Republic want electricity interconnectors between Holyhead and Dun Laoghaire, and also a gas interconnector from the northern gas fields to Dublin. I do not imagine that the Irish Government are thinking in terms of political unity, nor am I thinking in those terms.
The arguments are best put in a report of the Northern Ireland Economic Council entitled "Recommendations on Energy Policy in Northern Ireland". I wonder whether anyone in the Department has read that report or, indeed, any of the excellent reports produced by this body on the subject of energy problems in Northern Ireland. The report says:
we question whether it is realistic to expect an entirely separate and self-contained electricity supply industry in Northern Ireland to be able to provide electricity at charges and at a standard of service which match those prevailing in Great Britain. Since costs, relative to Great Britain, are of great importance to the economic viability of the Province, the Council is led to the conclusion that the interests of Northern Ireland might be well served by some form of amalgamation between the electricity supply industry in the Province and the main body of the industry in Great Britain.
In another part of the report the council argues exactly the same case for the gas industry.
At a time when there are 100,000 unemployed in the Province, rising by another 25,000, I can think of no better way of boosting the whole economy of Northern Ireland than to allow its citizens and manufacturing industry to have parity of energy costs with their fellow citizens in the rest of the country. Because the Government resist that proposition, I shall vote against them tonight.

Mr. Tim Renton: Speaking after the hon. Member for Armagh (Mr. McCusker), it is easier than usual to say that I listened to his remarks closely but that I do not propose to comment on them. I leave that to the Minister. There is one matter that I should like to raise with the hon. Member. I understand that the Irish Government are considering the possibility of extending the new gas pipeline to take gas from the Kinsale field from Dublin to Ulster. I hope that that will happen, and that the proposition will be given serious consideration. If it comes about, it will provide a good example of cross-border co-operation, and it will have the effect of lowering gas prices in Ulster.
I shall confine my remarks primarily to oil and gas. I declare two interests; first, in the search for energy, as a director of an oil exploration company, and secondly, in the conservation of energy, as a director of a company making replacement double-glazed windows and doors. I shall say more about that company in a moment.
Unlike my hon. Friend the Member for Canterbury (Mr. Crouch), I congratulate my right hon. Friend the Secretary of State and his ministerial team on their solid achievements over the past 18 months. They inherited a tangled skein of energy policies from the previous Administration and have tried, in what I believe to be the second most exciting and exacting job in Government, to draw from that an orderly energy policy. I say "second"

advisedly, because the problem of monetary aggregates and sorting out sterling M3 must remain the most exciting and exacting job of all.
The Secretary of State and his team have a tremendous task to perform. In three areas they have done well. First, they have done well in the decisions that they have taken about nuclear power plants. It must be a great help to the heavy engineering industry to know where it stands. As my right hon. Friend said in his opening remarks, we shall slowly and belatedly get into the position of having more cheap, nuclear-produced electricity. The second area in which the Government have done well is in their decision to go ahead with the gas-gathering pipeline. Thirdly, they have done well in the encouragement that they gave to the smaller British company in the seventh round of North Sea licensing. The BNOC is no longer in as predominant a position in this round as it was in previous rounds. Those are three important steps forward.
The production of energy is now as important for any industrialised nation as that of steam or iron and steel was in the first Industrial Revolution. Every industrial nation will now be judged on its control over energy resources, its energy consumption and energy conservation. But what worries me is that as we enter the great period of energy independence for this country, for which we are so much envied by other EEC countries, that independence lies almost entirely within the control of three 100 per cent. nationalised industries—the Coal Board, British Gas and the BNOC. That in itself is a paradox for this Conservative Government.
We in the Conservative Party are very concerned about the overall record of nationalised industries—their losses, their poor industrial relations, the discontent of the unions and of the management within them. In my view, it is then totally illogical to leave energy, by and large, within the orbit of nationalisation.

Mr. Alex Eadie: rose—

Mr. Renton: With respect to the hon. Gentleman, I shall not give way because we have been asked to keep our speeches brief. For that reason alone I shall not give way to him, because I know his deep knowledge of the coal industry.
Nationalisation tends to lead to monopoly and, almost inevitably, monopoly leads to abuse of monopoly. I see signs of that already in British Gas. I have the greatest respect for the technical achievements of British Gas and for what Sir Denis Rooke, its chairman, has done to make it such a competent and internationally respected organisation. But there are signs in that organisation of abuse of monopoly power, not only in its control over gas heating appliances but in its approach to industrial consumers who, once they have installed gas and are dependent on it, are treated as members of a closed shop in which British Gas holds all the union cards.
I refer the Minister to the double glazing company that I mentioned earlier and to a copy of the contract in which Eastern Gas asks the company to move to a special offer and special supply arrangements. If the company signs the contract the price per therm will be 26·1p. If it does not sign, the general tariff rate of 42p per therm will apply. Obviously the company is encouraged to sign.
However, if the company signs the contract it will be penalised heavily for any excess use. When it takes in excess of the maximum agreed it will be charged 40p per


therm per month and £4·50 per therm per day. Furthermore, the corporation does not believe its own meter reading. All bills will be increased by 1 per cent. in respect of temperature and by 2 per cent. in respect of pressure. In layman's language that is a straight uplift of 3 per cent. in the meter reading.
The contract contains many other objectionable clauses. One involves the payment terms. At present the company pays its gas bills quarterly. If it signs the special contract, it must pay monthly. That is not so bad in itself, since it is acceptable as normal practice. However, condition 4 of the contract states that payment must be made within 12 days of the corporation dispatching the invoice. That is completely unacceptable. Any efficient commercial concern operates a monthly bought ledger which allows the use of computers and payments by a single cheque for supplies for the whole month. However, if the company does not pay on time, interest is charged at 4 per cent. above the Midland base rate. There is a simple word to describe that contract—"blackmail." It is not tolerable whether it is operated by a nationalised industry or by the private sector. The only remedy is competition wherever feasible.
I therefore welcome the steps that the Secretary of State is taking to introduce freedom to import coal, to encourage private electricity generation, and to help towards the break-up of the monopoly on the distribution of onshore gas. But in many cases competition is not feasible. Therefore, I urge my right hon. Friend to allow employees and British consumers to own some of the equity—some of the action—in the energy producers—the BNOC and the British Gas Corporation. There are many reasons for that. One is the profitability of the two organisations. It is likely that within a year or two the two organisations combined will be making between £1,000 million and £1,500 million profit, pre-tax, per year. If we do not introduce private equity capital and private shareholders that profit will be available to be frittered away by the next Labour Administration.
A second reason is involvement by employees and consumers in ownership of the company for which they work and of their own national assets. Shareholders are certainly far better watchdogs than any Select Committee. In any nationalised industry only one shareholder is allowed to attend the AGM—the sponsoring Minister. That is hardly industrial democracy.
But the most important reason is that the last 30 years have shown the inefficiency of nationalisation as a means of running large industrial corporations and of organising and motivating the work force and management in such corporations. I have no doubt that, just as the British Steel Corporation started as an amalgam of 14 steel companies, some of them successful, and has turned into a Moloch of bad industrial relations, low productivity and depressed management, so in time the BGC and the BNOC, if left without any element of inquisitive private capital and of, at times, querulous and assertive private and employee shareholders, will lose their edge. They will lose some of their international competitiveness and their ability to lead the field. It is vital to our industry that the two major corporations should remain ahead in productivity and technology.
The development of the North Sea and the continental shelf is one of the finest engineering achievements in the world. In the years ahead we shall have the ability to sell to the rest of the world the engineering skills that have

come from North Sea development. We shall have the ability to sell the geological knowledge. Much of that knowledge could be used in the exploitation of sea bed minerals, for example. But I do not believe that that can or will be done successfully by nationalised industries if they remain 100 per cent. State controlled. We must have mixed share ownership, which brings the private and public sector together.
A common objection from the Opposition is that if that happens we shall lose control of our national assets. However, do we lose control of the family jewellery if we hand it on to members of the family? Is that not exactly where it should go? The articles of association of the two industries, once in mixed share ownership, could be so arranged that control could not pass to an overseas company. Britain could still retain full control of the direction in which the oil and gas production flowed.
Let us examine other international oil companies. BP is a tremendous example of an oil company in which the Government have a 25 per cent. interest. The Bank of England has a 19·6 per cent. interest and the rest is held by private shareholders. Many other companies are similar. The Norwegian Government have a 51 per cent. interest in Norsk Hydro. The French Government have a 35 per cent. interest in Companie Francaise des Petroles, which controls Total. The French Government have a 67 per cent. interest in Elf Aquitaine. The German Government have a 54 per cent. interest in Deminex and a 40 per cent. interest in Veba. Those companies are highly successful. They have all shown that the private and public sector can work together in partnership and share ownership.
I urge the Secretary of State to ensure that a firm start is made on the process of involving private capital and employees in the ownership of the equity of the BGC and the BNOC. The ideal split could be 40 per cent. State, 10 per cent. employees and 50 per cent. private sector, including the pension funds and the life assurance companies. That would be a fulfilment of our belief that employees should participate in the ownership of their own organisations. It would be a fulfilment of our belief that people are much better able than politicians to look after their own savings.
I realise the difficulties involved if all the cash from the organisation does not flow back into the public sector, but there should be a firm commitment to have this process well under way by the autumn of 1982. If we do not do that, I fear that in 10 years, in the 1990s, we shall look back and say, as the founders of British Steel say today, "We had our chance. We could have brought in private and employee ownership of these great national assets as a balance to politicial misjudgment but we failed. Now we have once again let Labour, with direction of funds and State intervention, turn golden geese into dead ducks."

Mr. Gordon Wilson: The debate has ranged fairly far and wide, as one would expect with such a general subject. I am glad that the hon. Member for Armagh (Mr. McCusker) has blazed a trail that is different from the normal United Kingdom approach to energy problems. I intend to do something similar in relation to Scotland.
In debates of this kind it is my practice to begin by re-emphasising that the United Kingdom is reliant upon Scottish sources for its domestically owned oil supplies


and will be increasingly so for gas. I make that statement not to suggest that Scotland has so far benefited very much from the oil industry, except in jobs related to development, but to point out to the hon. Member for Armagh that although one may indeed possess large resources, in the neo-colonial situation that sometimes exists in the United Kingdom one does not always get the advantage from them.
Scotland is in the front line in oil. I had great sympathy for the late Dr. Mossadeq of Iran, when he had to face the Anglo-Iranian Oil Company, and for many of the Arab countries that were faced with a similar situation, in which their natural resources were relentlessly and ruthlessly taken over.
My remarks this evening will relate particularly to the electricity industry in Scotland. Although the nuclear industry has not featured over-largely in the debate it is clear that the United Kingdom, having started out very strongly in that sphere, has succeeded in spreading its resources over so many forms of nuclear power that it has ended up with a very messy situation. On my calculations, there has been investment in about six different types of reactor—the Magnox, the AGR, the SGHWR, the AGR Type 2—the AGR being hardly ever completed and seeming to be designed and redesigned all the time—the PWR and the FBR. The generation of electricity by nuclear means has therefore left much to be desired, whether one agrees or disagrees with nuclear generation as such.
This evening I wish to deal with the situation in respect of the electricity boards in Scotland. In my youth I was brought up to admire the enterprise of the Scottish electricity boards, and in particular the North of Scotland Hydro-Electricity Board. In its early days, under the dynamic leadership of the late Tom Johnson, the hydro-board operated with social and economic purposes akin to those of the Tennessee Valley Authority, and brought social and economic developments as well as power to many parts of my country.
There is clear evidence that that situation has changed. A number of years ago there was a joint generation arrangement between the hydro-board and the South of Scotland Electricity Board in which they shared generating facilities and operated on a joint accounting basis. Unfortunately, that seems to have sapped a great deal of the enterprise and vigour previously exhibited by the hydro-board. It was almost as though the greater body had absorbed the lesser. In that context—I refer here to the remarks of the hon. Member for Armagh—there would indeed be a danger for Scotland if our electricity systems were to come into any wider European arrangement. I am well aware of the Channel line that has been proposed. A CEGB document estimates that a fair proportion—up to 40 per cent.—of the power required could come from Scotland. That seems an extraordinarily high proportion. The same would apply if there were stronger links in generation with the CEGB in England.
Last summer, far from trying to encourage development in remote areas the hydro-board turned its back on its traditions and sought to impose an additional charge for electricity supplied to island communities. That plan was abandoned only after a great deal of protest by my right hon. Friend the Member for Western Isles (Mr. Stewart), the right hon. Member for Orkney and Shetland (Mr. Grimond)

and the hon. Member for Argyll (Mr. MacKay). It is hardly surprising that it was changed. Nevertheless, it was what the hydro-board had set out to do, completely at variance with its own tradition.
I am particularly worried about the situation that is developing in Scotland in relation to generation over-capacity. The situation is something of a mess to begin with. The hon. Member for Armagh referred to the situation obtaining between Northern Ireland and the Department of Energy. In Scotland, the electricity industry is under the control of the Secretary of State for Scotland. When decisions are taken on nuclear power, however, the evidence seems to suggest that the Secretary of State for Scotland does not play a leading role, and that United Kingdom decisions are taken which have ramifications in Scotland well beyond those that the Secretary of State for Scotland may have considered—if, indeed, he had turned his mind towards them.
The Department of Energy has oversight of coal, 70 per cent. of whose market is to the South of Scotland Electricity Board. It also has control over oil, gas, and research and development into nuclear power and renewable sources. I believe that we also have to share the Select Committee on Energy, since although the Select Committee on Scottish Affairs has parallel jurisdiction it has to cover an area equivalent to seven or eight United Kingdom Ministries amd therefore has not sufficient time to do that kind of job in relation to energy matters in Scotland. I hope that it will give it a try, but so far it has not set out to do so.
There are certainly problems about the attitude of the South of Scotland Electricity Board. I may say that one problem is that it tends to have a pro-nuclear mania. Leaving that aside, however, over a considerable period it has overestimated the demand for electricity. It probably had a very good record in the 1950s and early 1960s, based largely upon the fact that so many houses in Scotland were all-electric that demand could be expected to grow indefinitely. The board therefore followed that course through. From the late 1960s onwards, however, steps were taken—for which the House must take a good deal of blame—that led to the waste of large amounts of public money.
Every year there is a debate on a statutory instrument seeking to give money as a subsidy to the Invergordon smelter. It is not that one minds subsidising industrial activities in an area such as Ross and Cromarty, but about £200 million has been set aside for this purpose over a long period, and already £70 million has been paid out—all based upon a miscalculation in the commissioning of the nuclear reactor at Hunterston B and the cost of electricity that would be generated by that reactor. In anyone's language, that is a fair amount of money to be set aside because of wrong calculations, yet no witch hunt seems to have followed, and there has been no attempt to assert some kind of discipline over the Civil Service, which had made the mistake.
Throughout the 1970s grossly inflated demand growth forecasts were rarely reached. Between 1970 and 1975, the South of Scotland Electricity Board estimated an annual growth of 6 per cent. Yet only once, in 1972–73, did the figure go beyond that, to 6·5 per cent. The next highest was 2·8 per cent. In 1975, after considerable urging, the board reduced its estimate to 5 per cent. annual


growth. In 1978 it was reduced to 4 per cent. In 1979, it was reduced to between 3 per cent. and 3½per cent., but the actual figure achieved in 1979 was 2·5 per cent.

Mr. Palmer: Is it not possible that the reason for that overestimating of electricity demand in Scotland is simply that the Scottish electricity authorities will persist in estimating their needs on their own, on a Scottish national basis? If they shared demand with the rest of the United Kingdom, without giving up their identity, they would need to overestimate.

Mr. Wilson: I do not agree at all. I think that the boards' duty should be to estimate demand accurately for Scotland. One could take that example further and say that if the CEGB made the same mistakes' in miscalculation, and there were the Scottish and Northern Irish miscalculations in addition, there would be a bigger blunder at the end.
I think that the problem arises because the electricity boards in Scotland have been super-optimistic in two ways. One was that electricity, despite the increases in cost, would still be the main form of fuel to be used in Scotland. That was not true, because gas came in later in Scotland and began to have an impact on the market. The second was in their estimation of the economy. In the Electrical Review of March 1979 the chairman of the South of Scotland Electricity Board admitted a plant margin of both boards of 40 per cent. He declared:
We take an optimistic view of the economy",
adding that not to do so was a policy of defeat. It might have been a defeat for what I call the madcap nuclear expansionists in the SSEB, but it would have been a damned sight cheaper than building all the new power stations.
Inverkip, an oil-fired station that may well he mothballed, cost £170 million. Peterhead cost £220 million. Torness, in which the Government have a degree of complicity, will cost £1,097 million.
By May last year growth expectation had dropped to 1¾per cent., and there was a 63 per cent. overcapacity at maximum demand, but in that month the first set came into existence in the area of the hydro-electric board, at Peterhead power station. A second set will be commissioned this year, bringing another 1,250 megawatts on to the Scottish scene. That shows that the whole business of forecasting power demand in Scotland has gone mad.
I am very disappointed that the Select Committee on Energy has not produced its report. Only last month the South of Scotland board rushed ahead and placed orders for £500 million or £600 million worth of machinery for Torness. I do not see how that can be justified in any language. I await with great interest the Select Committee's report. I sat in as an observer last May, when evidence was given by the chairman of the SSEB and a representative of the Scottish Economic Planning Department. As a Scot, I was ashamed by the low quality of the evidence given and the inability to justify the course of action that the board had adopted.
We have overcapacity and the mothballing of stations. It is a disgrace that this has happened. I am surprised that it has, in view of all the concern about the expenditure of public money and the 63 per cent. over-capacity, especially if we add in the Peterhead output and the fact that the Torness station is going ahead. This will, in my view, lead to the closure of power stations. Kincardine

must be at risk. Carolina Port B, in Dundee, is already having redundancies, and there are other examples, with modern plant rather than old plant being taken out of commission. In 1978 I was told by the SSEB that:
No existing plant will be phased out specifically to allow the introduction of Torness. We expect that some 400 MW of old plant will have reached the end of its useful life and will be retired in the normal way between now and the time when Torness first comes into service.
Inverkip—which is an oil-fired station, and is admittedly expensive to run—was envisaged for peak load and what the board nicely describe as
variable output, depending on price".
Some of the coal-fired power stations may now begin to drift into the danger zone. If they do, that could lead to problems for the coal industry in Scotland.
I have a number of suggestions. The use of oil revenues for energy purposes is a good use. We should give resources to industry to install more efficient energy-using equipment and to use heat recovery. There is a lovely story that the SSEB now taps heat from its computer system. It finds it cheaper to heat its head office in that way rather than by using its own electricity. Fluidised bed furnaces and better insulation should also be installed in the industrial sector.
Secondly, it would be very useful, despite the over-capacity that I have mentioned, to have a combined heat and power system. I admit that the overcapacity may be an argument against it, but it would be appropriate for reasons of climate.
Thirdly, we should insulate every house to North European standards. Our present standards are abysmal, resulting in economic hardship, physical discomfort and illness as well as dampness and condensation, which have now reached epidemic proportions in the public sector.
Fourthly, additional investment should be given to the Scottish coal industry to make sure that it is not forced out, although the policy that the boards have adopted will make that very difficult. The National Union of Mineworkers should be very wary about what is happening.
Fifthly, we should try to convert the somewhat dozy and reactionary hydro-board into the board responsible for developing and using renewable energy resources, including wave and wind power. There is also an improving potential for small-scale or low-fall hydro schemes.
All of those proposals would in addition make us more efficient, provide jobs in construction, give relief from higher prices and provide better health and comfort.
Lastly, in Scotland there is a great injustice to be rectified. The hon. Member for Armagh had a fair number of injustices of his own to mention. The Scottish injustice to which I refer is that the flat-rate social security fuel allowance is applied to England and northern areas, including Scotland, at the same rate. Coincidentally, I yesterday received a letter dated 14 January from the electricity consultative councils for the north and south of Scotland districts. It said that the scheme should be improved by providing assistance in different ways with energy vouchers, and should take account of different climatic conditions in Scotland. It went on:
For example, the over-all average Domestic consumption of electricity in England and Wales in the year to 31 March 1980 was 4,020 units per annum with consumers in one Board Area averaging 3,373 units. The comparable average Domestic consumption of electricity in the South of Scotland Area was 5,328 units, and in the North of Scotland Area 6,678 units or just about twice the number of units consumed in the Area of the


lowest usage of the supply in any Board area outside of Scotland. It hardly seems reasonable therefore that for those who qualify for Fuel Allowances, the level of assistance is identical.
It is one of the facts of life in Scotland that, with many of the benefits of scenery, space, other environmental qualities, and so on, the climate is colder and that many people—the sick, the old, the disabled, those short of money because they are unemployed and have children—suffer considerably.
An energy policy is not simply a question of the ordering of priorities for the assessment of forecasts. It should relate to the supply of fuel at prices that ordinary people can afford to pay.

8 pm

Mr. John H. Osborn: I cannot support the wording of the motion, which asks the House to condemn
the pricing policy which handicaps the competitiveness of British industry",
but I accept the amendment, which refers to:
the realism of the Government's energy policy and…the renewed vigour
of our policies. I praise my right hon. Friend the Secretary of State for the lucid way in which he outlined the problem that faces him as Secretary of State and this country when he replied to the questions of the right hon. Member for Leeds, South (Mr. Rees). It has already been mentioned in the debate, but the local branch of the CBI in Sheffield the steel industry, the British Independent Steel Producers' Association, the chamber of trade and the chamber of commerce have pressed me to condemn the pricing policies of the Government, particularly the pricing policy of the British Gas Corporation.
As the Secretary of State said, energy—even energy in Yorkshire—is costly. That poses a challenge to industry in our country, but it also poses challenges to industry throughout the world. I accept the comments of the Secretary of State on the NEDC meeting and on the task force. If our competitors in Germany and France enjoy cheaper gas, oil and coal, and if it is due to a distortion, we should know more about it. He said that in general British prices to industry are comparable to those in the Community. I welcome the fact—it was mentioned by my hon. Friend the Member for Mid-Sussex (Mr. Renton)—that these monopolies have been invited to look at their tariffs. When the right hon. Member for Leeds, South was pressed on this matter, he said that he was not prepared to raise domestic prices in order to benefit industry. I do not think that many hon. Members would do so. Therefore, the principle that my right hon. Friend has put forward on pricing electricity and other sources of energy at economic levels is a policy that I endorse.
In Sheffield, in December, I welcomed the coal miners' settlement, but since then a problem has been posed to me. I have had meetings even this weekend, and it has been put to me that British coal is too expensive for the housewife. Between 60 and 65 per cent. of our electricity is dependent on coal-fired generation, and it is therefore also possible that our electricity is too costly for the housewife. While that responsible settlement is to be welcomed it is natural to be disturbed and vexed that energy may be more expensive in this country. I welcome a reassessment of the situation jointly with the trade unions, industry and the Government.
This is one of those difficulties that must be resolved. I have had the privilege of looking at the problem for many years from a wider point of view. I am delighted that my hon. Friend the Member for Lancaster (Mrs Kellett-Bowman) is present. In a European context, she looked at this problem with me when I was a nominated Member with her in the European Parliament. During the debate on steel, I mentioned that I had just returned from a meeting of the Western European Union in Paris. We had studied the question of the security of supply on the initiative of a German Social Democrat, Herr Flamig. Since then, I have had the privilege of having meetings with the OECD on economic, rather than energy matters, and there will be a debate in the Council of Europe on this subject, in so far as it affects our European neighbours as it does us. There had been the debate earlier this month in the Europe Parliament, too.
There is a priority in Europe that there should be greater independence from oil. I accept the Secretary of State's warning that oil is a material that we expect but cannot guarantee. Therefore, all the steps to reduce to consumption—a modern energy-saving programme, energy-saving concepts—are essential. But if the EEC was 60 per cent. dependent on oil eight years ago, Western Europe is now 63 per cent. to 65 per cent. dependent on it. It is possible that Europe will not get down to that level in time.
The Venice summit took place last summer, and all the alternatives are being examined on a European and international basis. I hope that in his reply my hon. Friend will refer to what has followed after Venice.
I return to the problem of coal. During the debate on steel it emerged that perhaps the more prosperous pits—not the Selby of tomorrow, but perhaps those in Yorkshire, Derbyshire and Nottingham—could, because of average coal—pricing policy, be carrying the high cost of mining in Wales and Scotland. There has been talk in this debate about further closures. If there were further closures, the high-cost pits would be closed, and the cost of British coal would be cheaper. This is a balancing operation that the Coal Board and the Government have carried out for years. I share the views of my right hon. Friend the Secretary of State that the "Plan for Coal" should be pursued. But by keeping these pits open we have a controversy in our steel works. They are aware that our coal is more expensive than it need be in order to keep miners in jobs.
It has been suggested that we should have subsidies, particularly for coking coal, on the scale of those in Germany. But it must be borne in mind that the Germans, with all their subsidies, produce a more expensive coal than we produce. There have been discussions on imported coal. The EEC concept is that in about 10 years there would be a demand for about 300 million tonnes of coal, of which 100 million tonnes would be imported. I discussed that in British Columbia; I saw it in Queensland, and even in Melbourne last year I saw opencast mining, where the coal extract in process is bound to be cheaper and safer than the deep mining that is encountered in this country. In the past, and even now, I would favour a levy on all imported coal, and an evening-out of prices. I remember that when I raised this matter last year as part of a common energy policy, in contrast to a common agricultural policy, my hon. Friend the Member for


Bedford (Mr. Skeet) asked which countries would support it. He said that a common energy policy was only in the interest of Britain.
I welcome the fact that the Minister spoke about the competitive advantage of the United States in chemical feed stocks and synthetic fibres because of its slowness in deregulation. There has been pressure on the United States, and I hope that the pressure will continue under its new Administration. It must be borne in mind that the United States has invoked anti-dumping legislation on steel and other products from Europe and the United Kingdom, but it has an unfair advantage in subsidising its energy.
I return to another point that the Under-Secretary of State for Energy made in letters to industry. We do not have the advantage of hydro-electricity which, to a certain extent, Switzerland, Austria and France have in Europe. Certainly, Canada has vast sources of hydro-electricity, which is bound to give the smelting industries of that country an advantage. I mentioned in the debate on steel that part of the Indian energy policy is to put dams in the Himalayas and make up its energy deficit by an expanded hydro-electric programme, thereby reducing the price of electricity for their industries. This solution is not available to Great Britain.
I turn again to coal. One question that I cannot answer is why we have a fuel oil tax to protect our coal industry at this time. It may have made sense 10 or 20 years ago, when it was introduced. I hope that the Secretary of State will ask the Chancellor of the Exchequer to look at that.
The problem facing Britain in the European context is that we have the energy, but at a price. We have the coal, but at a price. We have the gas and oil, but at a high cost of extraction compared with Middle East sources—say, 10 to 12 times the cost of extraction.
On top of that, in talking to politicians from Germany and France, I find it disturbing to hear them say that they look upon Britain as a high-cost energy supplier. Germany is getting out of the difficulty—this emerged from Herr Flamig's report—by using gas from Eastern bloc countries. On existing pipelines, Germany has 17 per cent. imported natural gas from Eastern bloc countries. It could well reach 30 per cent. when new pipelines are in use.
I discussed this matter in a committee meeting in the Council of Europe only last week and learnt that the Austrians were not getting regular supplies. They rather feared that the supplies were going to Germany, for some reason. Dependence on one source of external supply is, therefore, risky. The Italians and the French are developing links across the Mediterranean for gas and oil. That will be yet another source of supply.
Britain ought to sell to its European colleagues the fact that it has energy in the North Sea and that it is economically secure—in a military situation it may not be so secure—and I hope that the Secretary of State will emphasise this in talking to his ministerial colleagues when the Council of Ministers meets in the EEC.
It has to be borne in mind that France and Germany have embarked on an ambitious nuclear programme. This fact has been brought to my attention continuously. They will have cheap nuclear energy, at probably 60 to 70 per cent. of our cost. But this is a speculation and there is no information available on it.
Finally. I should like to mention a small matter which may seem irrelevant in the debate. The French have announced that they have a product called Carburol—a

mixture of alcohol and petrol. It is possible that the liquefaction of coal will be our answer, but I hope that within the Community there will be some standardisation. I should hate to take my car—dependent on petrol from refined North Sea oil—to countries just across the Channel, only to find that there are different grades of Carburol on sale there. This is a question that we should pursue closely. Certainly it must be pursued within the Community.

Mr. Arthur Palmer: I hope that the hon. Member for Sheffield, Hallarn (Mr. Osborn) will forgive me if I do not follow him in his remarks. He painted a fairly wide European canvas and I want to confine myself to two points that are very important to our own domestic electricity supply industry. The House knows my interest in that direction.
Five or six years ago a high-powered committee, made up of all the talents, with Lord Plowden—who chairs many such committees—in the chair, looked into the desirability or otherwise of the present structure of the electricity supply industry. I am sure that the Under-Secretary of State is familar with the report of that committee. A vast amount of evidence was taken; indeed, I gave evidence myself. It was confidently expected that action would follow.
The former Secretary of State for Energy, my right hon. Friend the Member for Bristol, South-East (Mr. Benn), prepared a Bill, which was later published as a White Paper. However, because of the parliamentary difficulties that existed at that time for the Labour Party, with the need to reach agreement with the Liberal Party, the Bill did not reach Parliament. I say frankly—I said it at the time—that I do not think that the matter was particularly well handled, but certainly there was much life and activity then.
What did the incoming Secretary of State for Energy do? The answer is: simply nothing. The problems that were outlined at great length by Plowden remain, but the Secretary of State for Energy dismissed the whole question in a written answer that was given towards the end of the Summer Recess. The usual inspired question was tabled and the Secretary of State called on those in the industry to work together more closely. He set out six principles on which they should work together, rather as if he were an executive director. I am sure that the electricity boards will undertake to do their best to work together and that they will do so in good faith. But, given the nature of their statutory responsibilities—which ultimately are to the Secretary of State for Energy and not to the Electricity Council—it is inevitably these that will be uppermost.
The board chairman—whether of the CEGB or the area boards—really cannot escape, their statutory responsibilities. When difficulties arise from time to time, as they are bound to do, the first consideration that any chairman has to give—he will be advised by his lawyers to this effect—is to the legal obligations. So it is the statutory responsibilities in the electricity supply industry that must be changed if there is to be any new way of doing things.
I say very strongly that the Secretary of State should not have ducked his responsibilities in these matters. His ministerial inaction led to the resignation of Sir Francis Tombs, the chairman of the Electricity Council. He is a very well-regarded man, of great experience in the


electricity supply industry and in electrical manufacturing, and his resignation has attracted, quite naturally, a fair amount of publicity.
Sir Francis was invited to become the chairman of the Electricity Council on the plain understanding that the organisational framework of the industry would be changed. He made it clear at the time that he accepted the appointment on that basis and had no wish to become chairman of the boneless wonder, the Electricity Council, as set up under the Conservative Government's Electricity Act of 1957.
It was announced today—we have been waiting for this for some time—that the new chairman of the Electricity Council has been appointed—Mr. Austin Bunch. I am sure that we all wish him well. I am glad that the promotion came from within the electricity supply industry—Mr. Bunch was previously deputy chairman of the Electricity Council—and that someone was not brought in from elsewhere, as in the case of the British Steel Corporation and the BNOC. I am glad that we have not had someone from across the Atlantic, or a merchant banker.
The new chairman is a man who knows something about the industry that he is asked to supervise. But Mr. Bunch will be lucky if he escapes the doleful experience of Sir Francis—to sit in the chair of a body that cannot take a decision unless it is agreed to by a multiplicity of area boards and the CEGB, which bodies, being separately on the distribution and the generation side, are often at odds with each other.
Since Sir Francis left he has said some rather unkind things about the Secretary of State, but as he said equally unkind things about the former Secretary of State we can allow these comments to cancel each other out. Appropriately, Sir Francis recently addressed the Institute of Bankers in Bristol. I am sure that the Department will have a copy of the address in its archives. He said:
I have shown that the nationalised industries occupy a major place in the industrial affairs of this country; that the country cannot achieve economic prosperity unless these industries are prosperous; and that the planning horizons of many nationalised industries extend well beyond the lifetime of a Parliament, let alone the short-term preoccupations of Ministers. How can we be expected to be successful when we are forced to spend so much management time in attempting to cope with the fundamental differences of approach produced by the political see-saw?
That was a cry from the heart. No one is more insistent than I on the proper differences of principle between political parties. Without those differences of belief and outlook politics would have little meaning. Sir Francis gives facts and figures to show how successful the electricity supply industry is. It achieves a higher return on capital than the majority of private industries do at present in Britain. If nationalised industries are to be fully successful, he says, there must be some continuity of policy between Governments. I agree with him but I do not think that the present Administration do, judged by their actions.
The Secretary of State should also face up to his responsibility for the steep rises in electricity prices. No one has been a stauncher defender than I of the need for a strong nuclear contribution to our fuel economy. However, we should leave the size of that contribution, in terms of extra generating capacity, to the electricity industry to decide. One must bear in mind the fall in

demand that has resulted from the general depression both at home and abroad, and the consequent swift rise in the margin of available capacity. Despite the replacement of old plant, the margin of spare capacity is likely to eat its head off in interest charges that will be passed on to the consumer in the form of higher price.
Whether the method of firing is nuclear energy, coal or oil is immaterial. The argument would be the same whether we were building extra Drax B coal-fired power stations or oil-fired stations. I have always argued that the use of nuclear power or coal-fired energy is primarily a matter of economics, although safety is also involved. Power supply engineers would be just as happy to burn kitchen refuse or manure if they thought that it would produce a better and cheaper result.
Once the pressurised water reactor is under way and has completed its inquiry stage, it is said that one new reactor will be built every year. One may not necessarily desire that outcome, but it will prove difficult for the electricity supply industry to carry the burden of interest charges on them. I must be careful because the hon. Member for Skipton (Mr. Watson) is on the same Committee as I and I do not wish to anticipate the Select Committee's nuclear report, which will soon be published. Those who followed the evidence given to the Committee in public will agree that capital charges have become so high that they are putting a break not only on nuclear development but on the general development of the electricity supply industry in terms of the improvement of load factors and efficiency.
The real culprit is the inclusion of investment within the straitjacket of the public sector borrowing requirement. Earlier, the Secretary of State said that the chairmen of the nationalised industries were content with cash limits. Sir Francis Tombs was not content. Sir Francis' address at Bristol is a fine textbook on the running of nationalised industries, I hope that the Minister will listen carefully to his words, because they contradict the earlier remarks made. Sir Francis said:
Government's interest in net borrowing arises from the fact that nationalised industry borrowing appears in the public sector borrowing requirement, undistinguished from revenue borrowing, for local authorities, social services or the National Health Service. This is patently nonsense. No private industry would confuse revenue and capital expenditure in this way. What, one might ask, is the fundamental difference between borrowing to build a power station and borrowing to build a new factory in Lancashire? Both contribute to the national welfare, both give an adequate return which services and repays the capital.
After all, a power station is simply a factory for producing electricity.
The Government are preoccupied—certainly the Prime Minister is—with the need to complete a big nuclear power programme. Indeed, the Prime Minister went to France and came back converted to the need to adopt in Britain the French programme. However, France faces a different energy situation. There is hardly any coal worth having in France, and no oil. If the Government, however, want to complete the British nuclear power programme as it stands, and if they wish to replace old plant that is becoming more and more worn, they must revise their narrow ideas about cash limits.
What does the present financial system mean to the consumer? It means that the present generation of electricity consumers—hard-pressed as they are—are paying to provide electricity for their children. If there is no change, very soon they will be paying to provide their grandchildren with electricity.

Mr. John Watson: I hope that it will not be regarded as impertinent if I add my personal congratulations to the right hon. Member for Leeds, South (Mr. Rees) on the way he has mastered his brief on this complicated subject. The motion before the House states
That this House deplores Her Majesty's Government's lack of overall energy policy
and
condemns the pricing policy which handicaps the competitiveness of British industry".
It was, therefore, with some concentration that I listened to the right hon. Member for Leeds, South in the hope that I could glean from his speech some indication of what would be Government energy pricing policy in the event of his becoming Secretary of State for Energy. It must be a reflection on my powers of concentration that, at the end of his speech, I found myself substantially unilluminated. From what I can see, the policy of many Opposition Members is, first, that British industry is paying too much for its energy and, secondly, that, even if it is not, it should be paying less. Both those contentions are highly arguable.
Even though I listened with great respect to my hon. Friend the Member for Canterbury (Mr. Crouch), I have yet to be convinced that British industry is paying over the odds for its energy. For every convincing speech that I hear to the effect that it is, I read a convincing document to the effect that it is not. I was personally unimpressed by the CBI case, presented to the Select Committee, to the effect that British industry, across the board, was paying too much for energy. It seems that the initial glitter of all the claims of unfair competition may not turn out to be the purest gold on closer inspection.
Is there a case for some form of Government assistance towards energy pricing? I should like to advance four reasons why I believe that there is not. First, if we are expecting people in British industry to take sensible decisions about their use of energy, we need to provide them with a sensible base of information on which those decisions can be taken. As soon as the Government start interfering in some artificial way in energy pricing, a degree of artificiality creeps in, which makes the reality of the decisions to be taken all the more difficult to achieve.
Secondly, there is now a refreshing degree of international agreement that energy should be based upon actual prices and market demand. That is entirely good. In conjunction with many other hon. Members who have textile interests, I join occasionally in the fulminations against the energy price policies of North America. We say that it is terrible that their industry should be subsidised to such an extent. I would feel the worst kind of hypocrite if, at one and the same time, I was to advocate that their policies should be changed to ours but that we should somehow be subsidising and, in that direction, changing our policies to theirs.
Thirdly, I do not believe that energy is so significant to the majority of British industry as has sometimes been made out in the debate. There are only six-industries where the total energy bill represents more than 10 per cent. of their added value—steel, aluminium, chemicals, glass, paper and cement. For all the rest, average energy costs are about 3 per cent. or 4 per cent. Even in those six industries I have mentioned, I submit that energy prices are not the biggest problem that they have to bear. Other

problems of overmanning, overcapacity or simply shortage of demand would be presented, I believe, by each of those industries as being a bigger problem than the price they are having to pay for energy.
This brings me to my final point. If the resources are available, is some form of energy subsidy the most worthwhile use of those resources? I shall not trot out the familiar PSBR argument. I do not completely agree with it. In a time of natural world recession, there is a case for a greater degree of flexibility in the amount of money that the Government may borrow. I note that total Government borrowing at the moment is 45 per cent. of our gross national product. In 1965, it was 80 per cent. of our gross national product. We could have a responsible degree of flexibility on the PSBR without any deleterious effect on interest rates or anything else.
Having made the assumption that some cash resources may be available, I fail to see that they should be put straight away into some form of energy pricing subsidy. I have two reasons. I do not see why, if a subsidy is available, the greatest part of that subsidy should go simply to those who use the greatest amount of energy. I refer to the industries I have mentioned. It has to be asked "Is any one of those industries so important and of such strategic or employment significance that it needs this specific degree of assistance?" My conclusion is that, important though they are, none attains that level.
I have a nagging doubt that if we were to use resources to subsidise energy prices, we would be treating the symptoms rather than the disease. If we are to use our scarce resources to bolster profitability in times of low natural demand, it has to be asked whether those scarce resources could not better be employed bolstering demand itself.
People have different suggestions. My hon. Friend the Member for Bath (Mr. Patten) would say that the PSBR should be increased and we should do something to reduce national insurance contributions. If some funds are available and we want to give some assistance, why not give something towards a conservation campaign in British industry which might conceivably save more than the assistance could buy in industry in the first place?
Finally, having read a great deal about this issue and having heard a great many expert people make long speeches upon it, I remain unconvinced that British industry is paying an unfairly high price for its energy. I cannot dispel from my mind the lasting suspicion that this idea that we are paying unfairly is advanced not because of the intrinsic common sense that it possesses but because it happens to represent the most convenient common ground for some kind of agreement amongst all the parties represented.

Dr. Oonagh McDonald: I am glad to be able to speak after the hon. Member for Skipton (Mr. Watson), because I disagree with virtually all his speech. I shall spend most of my speech disagreeing with almost all of the points he made.
I take the hon. Gentleman's last remarks as a convenient starting point. He said that the concentration upon the difficulties faced by industry over energy pricing was a convenient common ground—even, one may say, between both sides of the House, as well as between unions and management in industry, and as well as between the CBI, the NEDO and independent research


bodies. Does this mean, therefore, that this is a convenient stick that we can all use, for our various reasons, to beat the much beleaguered—and understandably beleaguered—Government? I do not think so.
Surely the point is that this is one of the problems which industry currently faces. For many industries, particularly medium and larger users of energy, their problems over high energy costs add to all their other difficulties, many of which, but not all, arise from the present Government's policies. It is not simply that we have found a convenient source of agreement between us. It is simply that this is one area, among others, in which changes in Government policy are urgently needed if our manufacturing base is not to disappear completely by the time that the present Government have finished their period of office.
Let us look at a few different aspects of this matter. I shall pick out as a convenient starting point some of the main points made in the NEDO report. Industrial users of electricity find that larger tariff discounts are available on the Continent, and that large users on the Continent can negotiate special further reductions, amounting in total to a cost advantage of up to 40 per cent. over United Kingdom users. American and Canadian users pay only one-quarter or one-third of the United Kingdom rate—although in those two cases there are special reasons for that, apart from matters of pure policy.
We find the same sort of problems in relation to gas prices. The large industrial users of gas on the Continent have a cost advantage over the United Kingdom users of up to about 20 per cent. That is an enormous advantage. Taking the average prices of gas identified in November-December by the National Utility Service, which is part of an international research conglomerate, we find that it is claimed that in a survey of 550,000 energy-using locations in eight countries around the world, British gas prices were found to be 18 per cent. more than German prices, 47 per cent. more than French prices, 108 per cent. more than American prices, and 200 per cent. more than Australian prices—although I would think that the Australian example is one that we should not use. Australian policy was quite successful in encouraging individual domestic consumers to use electricity, leaving vast amounts of gas available to industrial users, so perhaps that would not be the fairest comparison to consider.
The problem of fuel duty on heavy fuel oil has already been referred to. I do not want to concentrate on that issue.
The NEDO survey and other evidence supports what industrialists have been saying to the Government for the past year, that for industrial users, particularly heavy industrial users, the prices have been much too high.
The hon. Member for Skipton referred to the paper industry. The paper and board industry is well represented in my constituency. The energy costs for that industry are by no means an inconsiderable cost of production. Overall energy costs are rising above labour costs, and amount to about 30 per cent. of its total costs.
It may be thought that the board industry is not that important, but two features must be mentioned. First, it employs large numbers of people and, secondly, it supplies about 75 per cent. of the domestic market. If it were to vanish entirely—one feels that the industry as a whole is greatly at risk—what would happen? Immediately, the costs in terms of the balance of trade

would be about £100 million a year. More than that, in future those costs would rise, because we would have to import packaging products which would be more expensive because we use raw materials rather than waste products from abroad.
The hon. Gentleman may not consider such matters to be important, but I do, not only out of constituency interest but out of national interest. The same sort of points can be made about the other major industries to which he referred.
In addition to the CBI and the NEDO document, we have had the Department of Energy's reponse to it, which was more elegantly reiterated by the Secretary of State in his opening remarks. The response of the Department of Energy makes three basic points. It suggests that under-pricing of energy would encourage the wasteful use of energy. However, it fails to take account of two points. The first is that for the smaller and medium users of energy resources, the prices are an insufficient trigger to encourage energy conservation, which should be an important part of Government policy.
For the larger users, the high price of energy is not serving solely to encourage energy conservation. It is encouraging conservation, but at an enormously high price and at the cost of the loss of export markets and the loss of jobs. When considering policies, one should take one policy in relation to the other. If the high price of energy is destroying some of our basic industries and adding endlessly to the loss of jobs, it is high time that the Department of Energy got together with the Department of Employment which at least, under its Secretary of State, seems to recognise the seriousness of unemployment, if the recent remarks of the Secretary of State are anything to go by.
I particularly like the second point made in the response of the Department of Energy—
Energy prices are not fixed at a particular level for PSBR reasons.
The next sentence says:
But they are taken into account in framing the Government strategy. Reducing energy prices would affect the PSBR and even a small reduction would be expensive.
That is a wonderful piece of Civil Service jargon because it is an example of having one's cake and eating it.
It tries to pretend that the Government's pricing policy has nothing to do with their financial policies and their attitudes towards the PSBR. However, it plainly has. Some of my hon. Friends, particularly my hon. Friend the Member for Bristol, North-East (Mr. Palmer), have pointed out exactly what the impact of that policy is on the nationalised industries and on their attempts to invest properly and to supply energy properly in the future.
While I am on that topic, it would be interesting to know what the Secretary of State will do about the possible problems facing the British Gas Corporation. It is possible that the corporation has miscalculated the effect of the recession on demand for gas and also the effects of raising gas prices as much as has already taken place, and that it will therefore fail to sell enough gas this winter. What will be the consequences of that, both for the PSBR and for future gas pricing policy? It would be interesting to know whether the Secretary of State considers that the corporation has made such a calculation and what consequences he foresees for both domestic and industrial consumers.
Thirdly—this relates to what the Secretary of State said about setting up a task force, which is unfortunately much too restricted in looking only at energy prices in the EEC and not more widely—this response referred to the NEDO document and to comparisons of energy costs, for industrial users in particular, between one country and another. Quite rightly, the document says that it is difficult to make such comparisons, and describes the difficulties of comparing like with like and of taking into account the changes in the range of prices in force, and so on.
I agree that those are problems which must be taken into account if one is making a careful comparison. As an ex-academic, I know the importance of making sure that such comparisons are thoroughly worked out and that one's research is carried out as carefully and as properly as possible. Of course—but what a wonderful example of delaying tactics. Once one has written difficulties such as that into one's project, I can quite see—again, as an ex-academic—that one can spend five years ensuring that the comparisons between countries are thoroughly worked out.
That is what concerns me about the task force. For at least a year now the major industrial energy users—not people represented on these benches—have been crying out for the Government to do something urgently about energy prices before some of our basic industries are utterly destroyed.
In reponse, we get a document such as this, which has thoroughly built into it—as will, no doubt, be reiterated in the ground rules for the task force examining it—endless delaying tactics. We shall be told that the studies are being carried out and comparisons carefully worked out, and by the end of this Government's period of office we shall not only see no change in their energy policy but we shall not have much of an industrial base left either.
What I do not want to see is one of the policy recommendations in the NEDO document. That points out correctly that in other EEC countries domestic consumers pay more for energy than industrial users do. I do not necessarily want that kind of switch in this country. We all know that many domestic consumers in our constituencies already face a crippling burden of energy prices.
Instead, I should like to see what the Secretary of State referred to. He rightly pointed out that many industrialists are trying to conserve energy. They are looking at ways of cutting back energy costs. That is happening in my constituency. I should like to see positive interventionist policies—I am talking not about the Eastern bloc but about the examples of Japan and Sweden.
Japan is extremely vulnerable in energy supplies. With its high dependence on external energy sources it passed in 1979 a law on the rationalisation of the use of energy. It obliges factories to improve fuel utilisation to prevent heat losses and to look at heat recovery. A better standard has been developed by the Government. It is the function of the Ministry of International Trade and Industry to judge progress. Plants with high fuel consumption have been designated energy control factories. They have to appoint energy controllers whose brief is to cut fuel use. The Government insist not only that such people are employed but that they are properly qualified and, with Japanese thoroughness, the Government impose a two-day annual examination on each of the energy controllers to ensure that they know their job, are up to date, and are carrying the work out as thoroughly as possible.
Low-interest finance is available to companies to ensure energy conservation. That is serious intervention. It is not sitting back and hoping that if the prices are shoved up far enough the sort of conservation wanted will be achieved.
Sweden's scheme is less rigid than that imposed by the Japanese. It depends more on voluntary co-operation. But Japan has made more than £7 million available in low-interest finance for companies and large grants are made available in Sweden to assist high-energy users to conserve energy. Among those high-energy users—this is interesting from the point of view of the industries referred to by the hon. Member for Slcipton—almost half the total grants are to the pulp and paper industries to ensure that these high energy users make proper use of energy.
I should like to see not simply a review of the artificially high prices of energy resources, particularly gas, of which we have enormous supplies, and coal, but a serious interventionist policy by the Government to conserve energy and to provide finance for industry. That would be a rational policy for the Government to pursue. It is essential for the Government to pursue that policy as quickly as possible, before jobs and industry disappear by the end of their tern of office.

Mr. Nick Budgen: It is often my pleasure in general debates on the economy to follow the hon. Member for Thurrock (Dr. McDonald). She refers often to learned debates with great charm and thoroughness. I suspect that my approach to these problems is different from hers. The only common ground that she and I have is that both of us are primarily concerned with the grave problems faced by British manufacturing industry.
I start from the prejudice of representing a primarily suburban seat, but a seat where almost all my constituents work in heavy manufacturing industry. The few shares that I have are in a family company which has foundries, so my interests and affections are intimately tied up with heavy industry.
In the last 18 months I have had the very great privilege, under the arrangements made by the Industry and Parliament Trust, to spend much time with BP. I have come to admire the very intelligent but extremely discreet people who run BP. Anything that I say about oil pricing has nothing to do with any views that have been suggested to me by anyone in BP, as I hope will become clear.
My right hon. Friend the Secretary of State did not set out the Government's overall energy policy. May I suggest what it should be? This matter arises from my right hon. Friend's slightly evasive answer to the intervention of my hon. Friend the Member for Bedford (Mr. Skeet). The Government's energy policy must be the policy of OPEC. If OPEC forces up the real value of one form of energy, it follows, unhappily but inevitably, that other forms of energy will have to be priced at much the same sort of level, because otherwise there will be the sort of distortion that we saw in relation to gas when domestic consumers found that they got such an infinitely better deal from gas that they made enormous demands on the British Gas Corporation for the installation of gas heating, which could not be met by the corporation. Indeed, the corporation took the view that it would be dangerous to


meet that demand, because it knew that the price of gas was only temporarily significantly lower than the prices of other forms of energy.
My right hon. Friend the Secretary of State is as much a follower of OPEC as is Sheikh Yamani. Indeed, every producer of energy, from Sir David Steel down to Joe Bloggs in the Cannock pit, owes a great debt of gratitude to the cartel, but that cartel is having an appalling effect on British heavy manufacturing industry.
The three principal complaints made to hon. Members who represent manufacturing areas are that interest rates are too high, energy prices are too high, and the sterling exchange rate is too high. On the first point, I disagree with my hon. Friend the Member for Skipton (Mr. Watson). We have a public sector borrowing requirement of about £12 billion and every prospect that, for the reasons that my hon. Friend spelt out, the PSBR will be even larger in the next financial year. If we wish to finance a large PSBR and do not wish to cut it by cutting public expenditure significantly or increasing taxation, the corollary, if we wish to keep to monetary targets—and although we have not kept to them, I understand that they are still important—is high interest rates. That is disagreeable, but it is the logic of our professed, if not activated, monetarism.
On energy prices, I appreciate that we live in a world in which we have to accept world market prices for energy. I do not say that there is any such thing as a totally rigged market or a totally free market. We have what the Secretary of State describes as a free market price for energy but what is actually a partially rigged price.
I want us to ensure that if the cartel breaks in future the British Government have not got so hooked on high energy prices that they become the most active participant in supporting the cartel. That could easily happen. If the cartel broke it would have an appalling effect, especially on some of the small oil companies that have come riding in on the back of the oil boom. There will be great pressure on them. But it will be splendid for my constituents. Not only will they obtain cheaper energy; they will also find that one of the factors that hold up the sterling exchange rate has disappeared. They will find that the rapid process of change, which has been so much welcomed by so many of my hon. Friends, does not have to take place.
My right hon. Friend the Secretary of State, in his speech on 4 January, seemed to be rather forgetful of the electors of Dudley, whose votes he once canvassed. He spoke instead of the new prosperity bypassing the old manufacturing areas such as Wolverhampton and Dudley. No doubt the new prosperity will be strong in Guildford. On the other hand, the Governor of the Bank of England, in his speech of 20 November, appeared to say something very different. In paragraph 27 he said:
The adaptations that will ultimately be required to a high relative price for oil and gas are hard to foresee with precision. I very much doubt, however, that they will involve a process of de-industrialisation".
I do not know, and no one can know, what will happen to OPEC. I want to see some element of detachment between the Government and the oil industry.
Time is short, and I shall be brief. It is vital that the Government now raise funds by selling their remaining shares in BP. I agree entirely with Mr. Ivan Fallan's argument about that. I understand that the price tag is £1·7

billion. I much regret that the Government have not decided to reduce the activities of BNOC. I accept that there may be an argument for some Government activity in oil, principally to find out the real incidence of tax upon those companies which—I shall put this carefully—are discreetly and intelligently run. I believe that Mr. Peter Lilley's arguments about the auctioning of licences ar correct. I wish to see both the Government and the Department of Energy become less wedded to the producer, and more mindful of the appalling effects being felt by the consumer.

Mr. Alex Eadie: What has characterised the debate, especially on the question of pricing, bas been the different points of view of Conservative Members. There was no unanimity of agreement with the Secretary of State's opening remarks. The right Gentleman spoke for 50 minutes. I am entitled to press him on some of the main points made by my right hon. Friend the Member for Leeds, South (Mr. Rees). The right hon. Gentleman could have responded to them in his speech. When my right hon. Friend pointed out that it was time that we had a full-scale energy debate in the House there was general acclamation from both sides of the House. Yet this full-scale energy debate has been initiated by the Opposition, in Opposition time. It would have been lovely if the Secretary of State had said "I shall see my right hon. Friends and we shall have more energy debates". But the right hon. Gentleman had a brief, and he stuck to it. He never lifted his head. He did not respond to my right hon. Friend's points.
It was reasonable for my right hon. Friend to say that if the Secretary of State is going to Europe to attend Energy Council meetings of great import for energy decisions, energy policies and energy impact, he should come to the House and make a statement. Indeed, it is already established procedure. It is done for agriculture and all matters relating to Europe. I thought that the right hon. Gentleman would respond. Even if he had said "No", one would have gained the impression that he had listened to what was a reasonable proposition.
We can have all the Select Committees under the sun and all the various bodies outside the House of Commons, but this is the place where discussions should take place. It is in the House of Commons where we should have great discussions and information about energy. I am disappointed that the Secretary of State did not respond, not to a party political point but to a matter relating to the stature and structure of the House of Commons. I hope that the right hon. Gentleman will reflect on this matter and ask his hon. Friend the Under-Secretary of State when he replies to the debate to comment on it.
I understand the predicament of the Under-Secretary in replying to the debate. He will not have time to reply to all the points that were made. That is all the more reason for having more energy debates. The Minister will then have the opportunity of putting the Government's view and of trying to rally support from his hon. Friends who are very much divided on, for example, pricing policy.
I note that the hon. Member for Dundee, East (Mr. Wilson) has returned to the Chamber. The hon. Gentleman made a point which I do not really think he meant. The Minister will appreciate the point that I am about to make. The reference of the hon. Member for Dundee, East to the dozy North of Scotland Hydro-electric Board was unfortunate. It may be that he has some conflict with


individuals on the board. The Hydro-electric Board brought power to the Highlands and Islands. Tom Johnston was referred to in glowing terms. But the record must be made clear. I know many people who work for the Hydro-electric Board. They are very good public servants. Those people, even in terrible winter weather, maintain the electricity supply to the Highlands and Islands. We owe them a debt of gratitude. The hydro-electric system was one of the greatest pieces of public enterprise introduced by any Government. Therefore, I do not think that the hon. Member for Dundee, East meant what he said and it is necessary that the record should be put straight.

Mr. Gordon Wilson: I am grateful to the hon. Gentleman for putting the record right. I was not in any way impugning the services given by linesmen and others; I was attacking the policy makers and board members of the Hydro-electric Board who are not living up to the principles that were established on the formation of that excellent body.

Mr. Eadie: I thought I heard somebody say that "dozy" was not a good description. It may be of a football team. I do not know. I do not think that there are many dozy football teams in Scotland. Some may be indifferent. The hon. Gentleman's phraseology was not a precise description. I think that we can leave it at that.
I do not want to deal with pricing policy for very long, but various points of view have been put forward. I say that I do not want to deal with it for very long, because I bear in mind that the task force has been appointed. We wish it well in trying to give accurate information. One Conservative Member said that it was a question of industries looking not for subsidies but for fairness. Will the Under-Secretary of State clarify the precise terms of reference of the task force? Do the terms of reference of the task force cover only the EEC or is a more comprehensive examination envisaged? That is important, because we are speaking of Scandinavia and other countries.
All hon. Members welcome the task force examination. However, we have heard that electricity prices are to be increased. Will that price increase take place before the task force examination? Will the Government wait for the objective analysis before electricity prices are increased? Will they hold their hand a little in anything that affects industry? I ask that because I have received information from the Chemical Industries Association Limited. It claims that it is disadvantaged to the extent of £200 million compared with France and West Germany. That is a substantial amount. If that is true we are entitled to say that blatant discrimination exists.
I listened to the doctrinaire, anti-nationalisation, anti-trade union speeches by Government Members. I do not chastise hon. Members for holding a view but I am entitled to express the contrary view. It is ironic that the Government, not the trade unions, are causing unemployment because industry is paying a higher price for energy than it should.

Mr. Eggar: Will the hon. Gentleman give way?

Mr. Eadie: No. The hon. Gentleman's hon. Friends would not give way to me so I shall not give way to him. It is no good saying that energy represents about 6 or 10 per cent. of costs and that that does not matter much. Of course it matters, to industry. It can make the difference

between an industry surviving and going to the wall. We should not try to play the issue dowm. By all means, let us try to get the information. However, if the task force reveals that we are disadvantaged compared with our main competitors in Europe—and there is evidence of that—the Government must accept responsibility.
I have some sympathy with the argument about improper price cycles which can defeat attempts at a conservation policy. That is a fair argument. I have listened to the contributions from the Government side. The Government are being hoist with their own petard. The Secretary of State confessed that the main thrust of the energy conservation policy is based on pricing. The Government base their conservation policy on the market. That is a lazy, inefficient way to run a conservation policy. None of the bodies involved in conservation have suggested that pricing can be viewed in isolation. None of them ever suggested that pricing alone was an excuse for a Government pursuing an energy conservation policy.
I hope that as a result of the contributions made by both Conservative and Labour Members the Government will look afresh at the whole question of conservation policies and will able to produce a far more imaginative conservation policy than their present policy. What has happened to the concept that energy conservation should be a fifth source of energy, in the sense that one identifies oil, gas, coal, nuclear power and alternative sources of energy? The Secretary of State's argument on conservation was not convincing.
The hon. Member for New Forest (Mr. McNair-Wilson) expressed some misgivings about the Government's nuclear power policy. The Secretary of State suggested that the Government had inherited a shambles of a nuclear power policy. I do not know whether that is so, but it was the Secretary of State and the Government who announced the commencement of 12 nuclear reactors in 1982. I have here a press report in which the Under-Secretary of State is reported to have given a funeral oration for the Government's nuclear power programme. Have the Government reversed their policy on nuclear power? Do they find themselves unable to carry out the policy that they announced to the House? We are entitled to know.
I turn to the PWR. If the Government are running into difficulty with their nuclear power policy, it is of their own making. To have chosen the PWR and to have been associated with the Three Mile Island concept damaged the image of nuclear power in this country. I am not arguing from a Friends of the Earth point of view. I am simply saying that we had a nuclear power reactor that was associated with the Three Mile Island incident. It was a reactor of foreign make. The right hon. Gentleman knows from his own experience that the idea of a British PWR just will not materialise. The Nuclear Installations Inspectorate will insist that a British PWR meets the standards prescribed by it, so we are really talking about another brand-new, virgin reactor. The experience with brand-new, virgin nuclear reactors is that there have been problems and faults. I predict that the Government's policy on nuclear power will founder as a result of the technology upon which they have based it. If they wished to pursue a tested nuclear power policy, they should have backed British equipment. The AGRs should have predominated in that policy.
I wished to make those points because I think that the hon. Member for New Forest was the only person to try to bring that argument into the debate—

Mr. Eggar: Will the hon. Gentleman give way?

Mr. Eadie: No. I have already told the hon. Gentleman that I shall not give way.
What is the Government's policy on the fast breeder reactor? The hon. Member for New Forest expressed doubt about its future and its credibility. We are entitled to know. We must take advantage of these energy debates to obtain information from the Government. This is an important matter. It is no accident that we included in our motion the reference to "Plan for Coal", about which the Secretary of State made little comment. For the Government to stand aside, watching, or aiding and abetting, the plan's failure, will have serious consequences for those who work in the coal industry; for industry in general, which is dependent on supplying goods and services; and for the nation as a whole, because it is dependent on safe, secure supplies of indigenous energy with a long lifespan, to meet the appetite of the country's industry and provide for the people their creature comfort in the shape of light and warmth.
Without energy provision, our industry collapses and our people freeze. It has been said before, but it is well worth repeating, that a nation that wishes to be an industrial country must have access to energy, and preferably indigenous energy. It is not a question of facing relegation in the industrial league of nations. If one does not have the energy, one is just not in the league at all.
It is partly in this setting that the Opposition approached this debate when we incorporated the reference to "Plan for Coal". It is an established fact that, of all the energy riches that we possess in fossil fuels, coal is the one that we have in abundance. We have hundreds of years' supply of that fuel—50 years forward of identified, planned reserves. No other fossil fuel in this country can match that time span. Indeed, by the end of the century our other fossil fuels—oil and gas—will start to be a diminishing factor in our energy provisions. What is certain is that compared with coal they are finite.
As a raw material, coal has a flexibility in its use that other fossil fuels cannot match. It took the Yom Kippur war and the election of a new Government to reverse the trend and follies of previous Governments. The stupidity of the contraction of the coal industry was replaced by a policy of expansion and more investment. "Plan for Coal" was adopted as the industry's target and motivation: a deep-mined output of 120 million tonnes by 1985, with a later longer-term plan for 150 million tonnes by the end of the century.
I was asked to give evidence to a Select Committee of the House of Lords, whose main complaint was that our target should be higher, based on the forward studies and evidence that the Committee had taken.
It is worth while to refer to the table of National Coal Board capital expenditure for the years 1974–80. In 1974 capital expenditure stood at the disgraceful figure of £68 million. Then it raced to £112 million in 1975, £211 million in 1976, £266 million in 1977, £334 million in 1978, £454 million in 1979 and £617 million in 1980. I refer to those figures because doing so gives me the opportunity to mention the financial problen that we have

piled on the NCB. The Government make the capital available; they do not give the money to industry. The NCB is now paying £250 million a year in interest charges on that roll call of investment.
We starved the industry of investment previously and then we asked it to go like the hammers of hell in six years, knowing full well that it takes a long time for such investment to pay off. It takes 10 years to bring a new mine into production. The Government should look at that anomaly more constructively than they have done in the past. I refer to the Coal Industry Act 1980, which must be seen as the most extravagant piece of irrelevance that any Government ever presented to the House. The Government should withdraw that Act now. We should also ask the National Coal Board about the question of breaking even in three years. That is also irrelevant nonsense. When the hon. Member for East Grinstead (Mr. Johnson Smith) spoke earlier he said that the difference in the timing did not matter. But it matters to the extent of £200 million, which is very important to the industry. If the Coal Industry Act is applied it will cost the National Coal Board another £200 million.
The Secretary of State's comments about the 1980 Act are more related to political dogma than to reason. I support part of the case that the Government will advance about the difficulties of the energy industry at present. We have a mother-and-father of a world recession, in which most of the Western world is dipped at present. The irony of that is that it makes the Government's actions more inexcusable. Other Governments support their coal industries. In Belgium, Government support is worth £33·90 a tonne; in France, £18; Western Germany £14·90, and in Britain, £1·50 a tonne. Conservative Members talk about fair competition. What sort of competition is that, when our competitors receive those subsidies? What have the Government to say about that? Do the Government think that it is fair that our competitors should operate like that?
Britain's coal is the cheapest in Western Europe. I do not think that Conservative Members would deny it. Many factories are waiting to switch over from oil to coal, but because of the recession and lack of capital they are force to delay the switch. At present, coal has a 30 per cent. price advantage over oil. The figures for the costs of producing one tonne of coal in other countries are available. It costs £58 in Belgium, £45 in France, £41 in West Germany and £29 in Britain. Who says that the British coal industry is not competitive? Of course, the price of British coal has been undercut by Poland, the United States and Australia. Opencast mining, compared to deep mining, is part of the reason for that.

Mr. Eggar: rose—

Mr. Eadie: I stand by the statement that was made by the Under-Secretary of State for Energy, which I quoted during the debate on the Coal Industry Bill on 17 June 1980. He said:
we cannot necessarily rely on long-term continued availability and low price of imported coal. We in Britain are not alone in taking this line. As recent International Energy Agency studies have shown, the potential importance of coal is increasingly recognised everywhere.
I could not do better than that myself. Why should we import coal now? This year we shall import about 8 million tonnes of coal. That could be supplied by our industry. At present, there are about 39 million tonnes of


coal in stock, lying in the ground. The demand this year for coal is likely to drop by 6 million tonnes, therefore it makes sense to look at the whole question of coal importation. What about the promise made to the industry to protect it against short-term fluctuations in the price and availability of competing fuels?
It is clear, when we look at the cost in which the National Coal Board is involved, that an increase in stocks of 1 million tonnes costs it £30 million, and the cash limits with which the NCB is involved at present are in no way adjusted to take account of these rising stocks.
The Coal Industry Act 1980, to which I referred earlier, imposes severe additional restrictions on National Coal Board finances. All regional and operating grants are to be withdrawn over the next three years. It has been estimated, as I said previously, that this legislation will cost the coal industry £200 million.
With regard to coking coal, the position is a most serious one for most of the coalfields in Britain, even taking into consideration the severe contraction of the steel industry. We know what one of our competitors, West Germany, has done about its coking coal. Its coking coal industry received £418·3 million in direct aid, compared with the aid that our industry received of £8·4 million in 1979. Even when social grants are taken into consideration, the German subsidy was more than £35 per tonne. The right hon. Gentleman made some reference to the United States of America, but even there indirect subsidies and assistance are given to the coal industry.
Taking all these facts into consideration, I cannot put the case any better than it is put in the triple alliance "Steel-Rail-Coal" document, "What is the future?", which I hope the Minster has read. It says:
Coal—Because of the Government's refusal to grant the same support to the UK coking coal industry as is provided elsewhere in Europe, BSC in an effort to reduce its costs and improve its competitive position, has begun importing substantial quantities of coking coal which could be supplied from NCB collieries. At the same time the cut-back in steel production has reduced the total BSC demand…Initially, the Corporation defended its imports by claiming that there was a shortage in the UK of rank 301 coal.
There is no shortage now. The National Coal Board is involved in price rebate payments of £22 million in order to get the allocation from the British Steel Corporation at the present time. This will increase to £47 million.
The case that the Opposition have advanced tonight in support of their motion is a substantial one. The right hon. Gentleman, in the course of his remarks, talked about betrayal. If the Government pursue their policy in relation to the "Plan for Coal" and there are wholesale closures in the country, 27,000 jobs will be at stake. It will be an act of betrayal by the Government. The miners will be betrayed and the people will be betrayed. That is why my hon. Friends and I will go into the Opposition Lobby tonight and vote against the policy of the Government, who not only do not understand the position but handle it with amazing incompetence.

The Under-Secretary of State for Energy (Mr. Norman Lamont): I am grateful to the hon. Member for Midlothian (Mr. Eadie), because he said that it would be difficult for me to reply to the debate owing to its wide-ranging nature. Many different points have been raised and I shall do my best to reply to them.
The hon. Member for Midlothian concentrated on coal. We well understand some of the anxieties expressed.

Obviously, the recession has had a considerable impact on the coal industry, just as it has had a considerable impact on other parts of the public and private sectors. During this Administration it has often been said from the Dispatch Box that the Government believe—as I do—in a strong coal industry, and that it has a bright future. We believe that the industry has the ability to take advantage of the opportunities open to it. Great opportunities are open to it.
In the long term, for example, there are significant opportunities in liquefaction and gasification. If all transport fuel were to be produced from liquefied petroleum based on coal it would use 100 million tonnes of coal per annum. If all our gas were substiute natural gas it would use up 120 million tonnes of coal per annum. In the long term and the short term the outlook is very bright.
The hon. Member for Leigh (Mr. Cunliffe) and the hon. Member for Rother Valley (Mr. Hardy)—who is always very assiduous in speaking up for the coal industry—stressed the necessity to lessen our dependence on oil. They stressed the opportunities available to industry because coal has a relative price advantage over oil—to substitute coal-fired boilers for oil-fired boilers.
Despite the recession many of the pay-back periods for investment projects are short, and profitable investments can be made. Indeed, despite the recession this is a good time to make such investments. We hope that as much of manufacturing industry as possible will switch from oil to coal. It is right to be confident about the coal industry, but anxieties have been expressed, particularly about closures. The coal industry will not become like the steel industry. It will expand. New mines and new coal faces will be opened up. There will be a new coal industry.
Itis in the very nature of an extractive industry that some old mines close when new faces and mines are opened up. I was pleased that the right hon. Member for Leeds, South (Mr. Rees) accepted that. He said that there would have to be some closures, as had been accepted in the "Plan for Coal". It is for the management of the NCB to decide about the closure of individual pits. The industry has a good record of co-operation and consultation and I am sure that the unions will be consulted at an early stage about any closures.
The right hon. Member for Leeds, South also referred to the absence of a production target and the fact that no production targets had been specified for the longer term. It is for the industry to produce what the market will bear in the long term. The opportunities exist. The existence of a figure does not make any great difference. It is the market, and the need to satisfy that market, that is crucial.
Opposition Members have suggested that too onerous a turn about is being demanded. We are not so gloomy as the Opposition. As recently as 1976–77 the NCB achieved a break-even, before operating grants. Productivity is rising sharply. We have seen the first increase in deep-mined output since 1963. This turnabout is not impossible. It is a relatively small turnabout in relation to the overall turnover of the NCB. It is about £200 million, or 5 per cent. of turnover over a period of three years.
The question was raised of imports from, and subsidies in, other countries. Our imports, which are very small in relation to the total market—we expect a decline next year—do not come from those countries that subsidise their coal industries. They come overwhelmingly from the United States and from Australia where the industries are unsubsidised. It is true that in France, Germany and Belgium the industry gets, per tonne of coal, a higher


subsidy than in this country but it is a totally different sort of industry from this country's. It is much smaller in relation to the total energy market and the total demand for energy from industry in those countries. Those countries are importing much more than we import. Furthermore, they intend to expand their imports in the future. It is precisely because we believe that the industry can be competitive that we have set it a financial strategy.
I was asked why the Government insist so much that the industry should be competitive. The reason why we insist and want the industry to be competitive is one that is in the best interests of the industry itself. The future expanded market for coal will occur in the industrial sector, not in the Government-dominated electricity generation. In the industrial market, coal will be in competition with other fuels. One cannot dictate to industry which fuel it is going to use. That is why we owe it to those in the industry and to the miners that this should be a competitive industry. Only in that way will the future of the industry be assured. Only in that way will it be able to capture a significant part of the industrial market.

Mr. Skeet: rose—

Mr. Lamont: This leads me naturally to the other great concern expressed in the debate about industrial energy pricing. I want to deal with the points that have been raised, particularly by my hon. Friend the Member for Canterbury (Mr. Crouch), who made a powerful speech—

Mr. Rees: We are pleased to hear what the Under-Secretary of State says about the future of the coal industry, which means that we can say to those leaders of the NUM who are talking about a loss of 25,000 jobs this year that they have got it wrong.

Mr. Lamont: No such proposal has been put to us. The comments in the newspapers are pure speculation. It is not a matter on which we have received any indication from the National Coal Board.
I should like to return to the question of industrial energy pricing and the speech of my hon. Friend the Member for Canterbury. There has been considerable controversy, not just over the principles of policy, but also over the facts of the situation. That is why the task force to be set up by NEDO is a major step forward, not because, as the hon. Member for Thurrock (Dr. McDonald) suggested, it is merely going to be a talking shop or because it is going to shelve the problem. It is a major step forward because the differences about the facts and the differences of interpretation of the facts have been narrowed considerably.
At the NEDO meeting it was accepted, first, that the pricing of energy must be on an economic basis. Secondly, it was accepted that in general our energy prices are not out of line with those in Europe, although there was clearly a great difference in energy prices between ourselves and the United States.
Thirdly, it was agreed that there are some specific problems mainly relating to the large energy users, the energy-intensive industries, mainly on the electricity side but also, possibly, on the gas side. The hon. Members for Midlothian and for Bury and Radcliffe (Mr. White) asked whether the task force would be able to deal with energy

prices outside the EEC—in Europe, America and Scandinavia. The answer is that it can, although in those areas I think there is substantial agreement about the problems that already exist.
My right hon. Friend announced today the changes that we are asking the electricity and gas industries to investigate—the review of the bulk supply tariff and the possibility of larger discounts for bulk users of both electricity and gas. We hope that those things will bring substantial relief to industry. I ought, however, to be realistic about what is proposed for electricity. In electricity costs there is a difference between Britain and some other countries, but in some cases that may well reflect fundamental cost differences. The fact that a country such as France has a higher proportion of hydro-electricity and nuclear electricity is one of the reasons why it has a substantial advantage over us in the cost of electricity.
My hon. Friends the Members for Bedford (Mr. Skeet) and for Canterbury, and the right hon. Member for Leeds, South raised the question of the heavy fuel oil duty. That is a matter for the Chancellor of the Exchequer, who was at the meeting at the NEDO and is well aware of the strength of feeling from the representations that have been made.
Our heavy fuel oil duty is higher than that in other European countries, although our duty on other oil products may be lower. One has to look at the matter as a whole. The question of heavy fuel oil duty has many ramifications. It affects the price of industrial gas, because that is tied to the price of oil. Also, as the right hon. Gentleman clearly showed, it affects the price of electricity. That was why he had some reservations about reducing or abolishing that duty—which just goes to show the sort of conflicting considerations and the box that one is in when considering this problem.
At present, our heavy fuel oil prices are among the very cheapest in Europe. For much of 1980 they were higher, but it is a changing situation and probably over a five-year period our prices have not been much out of line with those in countries such as Germany. However, because they affect gas prices, as my hon. Friend the Member for Canterbury said, this is a problem that we shall consider very seriously.
My hon. Friend the Member for New Forest (Mr. McNair-Wilson) raised the question of the exchange rate and comparisons of energy prices. One point that tends to be overlooked when people ask why we cannot have cheaper energy is that a strong and rising pound gives cheaper energy in sterling terms. Because oil is priced in dollars, the price of North Sea oil is converted back into sterling, and thus, when the pound rises, the price of North Sea oil is cheaper to United Kingdom users than it would otherwise have been.
I give an example. A $39½barrel of oil would, at an exchange rate of $1·57 to the pound, cost £25·16 instead of the £16·46 that it now costs. So a strong pound helps energy users; it helps purchasers of oil; and it also affects the price of gas. That is one reason why, when looking at the price of gas in local currency terms, and looking at the price in sterling and comparing it with the price in francs or deutschemarks and comparing the increase in each of those countries in their local currencies, we find that British gas prices, as measured in individual national currencies, have risen very much less than have gas prices


in other European countries. That point was acknowledged in the Independent Market Research consultants' report, which was carried out for the steel producers.
The Government's view, which has been accepted by the CBI and by the Labour Party, is that our energy should be priced so as to ensure adequate and secure supplies iver the medium term. That does not mean pricing at yesterday's cost; it means taking account of the trend of future costs of energy. That policy was accepted and endorsed by the Green Paper of the right hon. Member for Bristol, South-East (Mr. Benn) when he was Secretary of State for Energy.
A number of my hon. Friends, including my hon. Friend the Member for Bedford, raised the question of the influence of cash limits on energy prices. I repeat what my right hon. Friend said, that energy prices are not determined by cash limits. They are set in order to cover the medium-term marginal costs. The external financing limit is worked out after that, and is not the determinant of energy prices.
A number of hon. Members asked why a country such as ours, which is energy-rich, should not subsidise it or have cheap energy, as in the United States. A few hon. Members—I am glad that there were only a few—suggested that we should follow the United States practice. I believe that to follow the United States energy pricing policy would be a great folly. It is often forgotten that before 1973 the United States priced its energy above word levels in order to protect its domestic producers. After the oil price hike in 1973 it changed its policy and decided to price below world market levels. The result was disastrous. Consumption was stimulated, and imports that were only 20 per cent. in 1973 soared, in a few years, to over half the energy requirements of the United States. Thus, to follow the example of the United States would be disastrous.
Another question raised in the date was why the price of oil should affect the price of gas. People have translated that question as "Why should our gas prices be determined by OPEC?" There are strong reasons, when the price of oil goes up, why those of gas and other fossil fuels are bound to follow. In many uses the two products are interchangeable. As my right hon. Friend said, the world is consuming more oil and gas than it is discovering. There is an imbalance between the world's demand for oil and its supply.
As some hon. Members argued, all these estimates of reserves and finite resources may prove to be grossly over-pessimistic. Some hon. Members argued that the answer to the oil problem might be oil itself—that more oil will be discovered under the sea, offshore, from coal and from shale. All these new sources of oil will come on stream only if we have the right pricing policy.
A number of hon. Members raised specific points relating to nuclear power. The right hon. Member for Leeds, South asked when the inquiry into the PWR would be held. It is expected to be held in 1982. I cannot say what the precise form of the inquiry will be, except that it will be as wide as possible. We want maximum discussion, and it is hoped that the construction of a PWR can be started in 1983.
My hon. Friend the Member for Bedford suggested that the nuclear programme was not going fast enough. But when we have been through a decade when the industry has had no inquiries and is run down, I do not believe that we can go quicker than we are just now. I do not believe

that we could build more stations, and build them to time. Heavens knows, we have had enough problems building them in time in the past. We have of course discussed with the industry what the scale of the programme should be.
The hon. Member for Truro (Mr. Penhaligon) criticised us because nuclear power stations were being sited in rural areas. This, he thought, implied that they were being acknowledged by Governments as unsafe; otherwise they would be located in the middle of city centres. The nuclear industry and Government simply cannot win. To satisfy public opinion and allay anxieties, they do not build nuclear power stations in the middle of cities, but they are then accused of doing so precisely because they know that they are unsafe. It a ridiculous argument.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) asked about mixed finance for some of the energy industries. My right hon. Friend the Secretary of State has said that we shall be taking powers to inject private equity into BNOC. I hope that that will meet my hon. Friend's point.
Listening to the arguments from some Opposition Members tonight—to be fair, only some of them—one wonders whether they are aware of the world beyond this country, whether news has reached them of the revolution in Iran or the war between Iran and Iraq. While that war continues, the danger is that vital supplies of oil will be interrupted and that the world will face another price explosion.
Even after the world returns to calm on the oil markets, we shall still be using our supplies faster than we discover new ones. In those circumstances, we cannot expect to live quiet lives and enjoy low energy prices.
As my hon Friend the Member for Skipton (Mr. Watson) said in an admirable speech, this country, like every other, needs to adapt to higher energy prices. We shall be in a better position than countries with no energy resources, for whom the rise in energy prices has been nothing short of calamitious. High prices bring problems for our energy-intensive industries and my right hon. Friend has announced some measures today to deal with them. But the fact that this country is rich in energy resources also brings opportunities.
That is why this Government have overthrown the policies of the last Government, which worked against greater investment in the North Sea. That is why we have insisted that the National Coal Board should be profitable again. Do the Opposition really suggest that, in an era of high energy prices, one of our major energy industries should be a loss maker? That is surely ridiculous. It is only by maintaining realistic prices that we can maximise our advantages as an energy-rich country.
To reverse our policies will mean that many of the jobs which have been created in the industries that supply the energy industries will not come into being. Many of the changes and adaptations in industry towards economising on energy use will not occur without proper economic prices—again, as my hon. Friend the Member for Skipton said in his excellent speech.
The route suggested by the Opposition will bring this country certainly not prosperity but great problems. Under the last Government, we tried to hide from falling demand for the products of some of our traditional industries. We hit competition from the low labour cost countries. we turned a blind eye to overmanning and overspending. We indulged restrictive practices. As a result, this country is


now chronically uncompetitive. The road back, the one along which we are leading the country, is difficult enough without repeating the follies of the last Government.
The time to pretend that our industries could hide and remain embedded in the past has gone. If we do not face reality, reality will face us with some very unpleasant consequences. The challenges to this country are great, but we can turn the transient advantage of energy into a permanent competitive gain. I urge the House to reject the motion and to support the Government amendment.

Question put, That the original words stand part of the Question:-

The House divided: Ayes 255, Noes 309.

Division No. 48]
[10 pm


AYES


Abse, Leo
Dunn, James A.


Adams, Allen
Dunnett, Jack


Allaun, Frank
Dunwoody, Hon Mrs G.


Alton, David
Eadie, Alex


Anderson, Donald
Eastham, Ken


Archer, Rt Hon Peter
Edwards, R. (W'hampt'n S E)


Armstrong, Rt Hon Ernest
Ellis, R. (NED'bysh're)


Atkinson, N. (H'gey,)
Ellis, Tom (Wrexham)


Bagier, Gordon A. T.
English, Michael


Barnett, Guy (Greenwich)
Ennals, Rt Hon David


Barnett, Rt Hon Joel (H'wd)
Evans, Ioan (Aberdare)


Beith, A. J.
Evans, John (Newton)


Bennett, Andrew (St'kp'tN)
Ewing, Harry


Bidwell, Sydney
Faulds, Andrew


Booth, Rt Hon Albert
Field, Frank


Boothroyd, Miss Betty
Fitt, Gerard


Bottomley, Rt Hon A. (M'b'ro)
Flannery, Martin


Bradley, Tom
Fletcher, Raymond (Ilkeston)


Bray, Dr Jeremy
Fletcher, Ted (Darlington)


Brown, Hugh D. (Provan)
Foot, Rt Hon Michael


Brown, Ron (E'burgh, Leith)
Ford, Ben


Brown, Ronald W. (H'ckn'y S)
Forrester, John


Buchan, Norman
Foster, Derek


Callaghan, Jim (Midd't'n &amp; P)
Fraser, J. (Lamb'th, N'w'd)


Campbell, Ian
Freeson, Rt Hon Reginald


Canavan, Dennis
Garrett, John (Norwich S)


Cant, R. B.
Garrett, W. E. (Wallsend)


Carmichael, Neil
George, Bruce


Carter-Jones, Lewis
Gilbert, Rt Hon Dr John


Cartwright, John
Ginsburg, David


Clark, Dr David (S Shields)
Golding, John


Cocks, Rt Hon M. (B'stol S)
Gourlay, Harry


Cohen, Stanley
Graham, Ted


Coleman, Donald
Grant, George (Morpeth)


Conlan, Bernard
Grant, John (Islington C)


Cook, Robin F.
Grimond, Rt Hon J.


Cowans, Harry
Hamilton, James (Bothwell)


Cox, T. (W'dsw'th, Toot'g)
Hamilton, W. W. (C'tral Fife)


Craigen, J. M.
Hardy, Peter


Crowther, J. S.
Harrison, Rt Hon Walter


Cryer, Bob
Hart, Rt Hon Dame Judith


Cunliffe, Lawrence
Hattersley, Rt Hon Roy


Cunningham, G. (Islington S)
Haynes, Frank


Cunningham, Dr J. (W'h'n)
Healey, Rt Hon Denis


Dalyell, Tam
Heffer, Eric S.


Davidson, Arthur
Hogg, N. (E Dunb't'nshire)


Davies, Rt Hon Denzil (L'lli)
Holland, S. (L'b'th, Vauxh'll)


Davies, Ifor (Gower)
Home Robertson, John


Davis, Clinton (Hackney C)
Homewood, William


Davis, T. (B'ham, Stechf'd)
Hooley, Frank


Deakins, Eric
Horam, John


Dewar, Donald
Howell, Rt Hon D.


Dixon, Donald
Howells, Geraint


Dobson, Frank
Huckfield, Les


Dormand, Jack
Hudson Davies, Gwilym E.


Douglas, Dick
Hughes, Mark (Durham)


Douglas-Mann, Bruce
Hughes, Robert (Aberdeen N)


Dubs, Alfred
Hughes, Roy (Newport)


Dunlop, John
Jay, Rt Hon Douglas





John, Brynmor
Race, Reg


Johnson, James (Hull West)
Radice, Giles


Johnson, Walter (Derby S)
Rees, Rt Hon M (Leeds S)


Johnston, Russell (Inverness)
Richardson, Jo


Jones, Rt Hon Alec (Rh'dda)
Roberts, Albert (Normanton)


Jones, Barry (East Flint)
Roberts, Allan (Bootle)


Jones, Dan (Burnley)
Roberts, Gwilym (Cannock)


Kaufman, Rt Hon Gerald
Robertson, George


Kerr, Russell
Robinson, G. (Coventry NW)


Kilfedder, James A.
Rooker, J. W.


Kilroy-Silk, Robert
Roper, John


Lambie, David
Ross, Ernest (Dundee West)


Lamborn, Harry
Ross, Stephen (Isle of Wight)


Lamond, James
Rowlands, Ted


Leadbitter, Ted
Ryman, John


Leighton, Ronald
Sandelson, Neville


Lewis, Arthur (N'ham NW)
Sever, John


Lewis, Ron (Carlisle)
Sheerman, Barry


Litherland, Robert
Sheldon, Rt Hon R.


Lofthouse, Geoffrey
Shore, Rt Hon Peter


Mabon, Rt Hon Dr J. Dickson
Short, Mrs Renée


McCusker, H.
Silkin, Rt HonJ. (Deptford)


McDonald, Dr Oonagh
Silkin, Rt Hon S. C. (Dulwich)


McElhone, Frank
Silverman, Julius


McGuire, Michael (Ince)
Skinner, Dennis


McKay, Allen (Penistone)
Smith, Rt Hon J. (N Lanark)


McKelvey, William
Snape, Peter


Maclennan, Robert
Soley, Clive


McNally, Thomas
Spearing, Nigel


McNamara, Kevin
Spriggs, Leslie


McTaggart, Robert
Stallard, A. W.


McWilliam, John
Steel, Rt Hon David


Magee, Bryan
Stewart, Rt Hon D. (W Isles)


Marks, Kenneth
Stoddart, David


Marshall, Dr Edmund (Goole)
Stott, Roger


Marshall, Jim (Leicester S)
Strang, Gavin


Martin, M (G'gowS'burn)
Straw, Jack


Mason, Rt Hon Roy
Summerskill, Hon Dr Shirley


Maxton, John
Taylor, Mrs Ann (Bolton W)


Maynard, Miss Joan
Thomas, Jeffrey (Abertillery)


Meacher, Michael
Thomas, Mike (Newcastle E)


Mellish, Rt Hon Robert
Thomas, Dr R. (Carmarthen)


Mikardo, Ian
Thorne, Stan (Preston South)


Millan, Rt Hon Bruce
Tilley, John


Miller, Dr M. S. (E Kilbride)
Tinn, James


Mitchell, Austin (Grimsby)
Torney, Tom


Molyneaux, James
Urwin, Rt Hon Tom


Morris, Rt Hon A. (W'shawe)
Varley, Rt Hon Eric G.


Morris, Rt Hon C. (O'shaw)
Wainwright, E. (Dearne V)


Morris, Rt Hon J. (Aberavon)
Walker, Rt Hon H. (D'caster)


Morton, George
Watkins, David


Moyle, Rt Hon Roland
Welsh, Michael


Mulley, Rt Hon Frederick
White, J. (G'gow Pollok)


Newens, Stanley
Whitehead, Phillip


Oakes, Rt Hon Gordon
Whitlock, William


Ogden, Eric
Wigley, Dafydd


O'Halloran, Michael
Willey, Rt Hon Frederick


O'Neill, Martin
Williams, Rt Hon A. (S'sea W)


Orme, Rt Hon Stanley
Williams, Sir T. (W'ton)


Palmer, Arthur
Wilson, Gordon (Dundee E)


Park, George
Wilson, Rt Hon Sir H. (H'ton)


Parker, John
Wilson, William (C'try SE)


Parry, Robert
Winnick, David


Pavitt, Laurie
Woodall, Alec


Pendry, Tom
Woolmer, Kenneth


Penhaligon, David
Wrigglesworth, Ian


Powell, Rt Hon J. E. (S Down)
Young, David (Bolton E)


Powell, Raymond (Ogmore)
Tellers for the Ayes:


Prescott, John
Mr. Frank R. White and


Price, C. (Lewisham W)
Mr. Hugh McCartney




NOES


Adley, Robert
Athinson, David (B'm'th, E)


Aitken, Jonathan
Baker, Kenneth (St. M'bone)


Alexander, Richard
Backer, Nicholas (N Dorset)


Amery, Rt Hon Julian
Banks, Robert


Ancram, Michael
Beaumont-Dark, Anthony


Arnold, Tom
Bell, Sir Ronald


Atkins, Rt Hon H. (S'thorne)
Bendall, Vivian


Atkins, Robert (Preston N)
Bennett, Sir Frederic (T'bay)






Benyon, Thomas (A'don)
Garel-Jones, Tristan


Benyon, W. (Buckingham)
Gilmour, Rt Hon Sir Ian


Bevan, David Gilroy
Glyn, Dr Alan


Biggs-Davison, John
Goodhart, Philip


Blackburn, John
Goodlad, Alastair


Blaker, Peter
Gorst, John


Body, Richard
Gow, Ian


Bonsor, Sir Nicholas
Gower, Sir Raymond


Boscawen, Hon Robert
Gray, Hamish


Bottomley, Peter (W'wich W)
Greenway, Harry


Bowden, Andrew
Grieve, Percy


Boyson, Dr Rhodes
Griffiths, E. (B'y St. Edm'ds)


Braine, Sir Bernard
Griffiths, Peter Portsm'th N)


Bright, Graham
Grist, Ian


Brinton, Tim
Grylls, Michael


Brittan, Leon
Gummer, Selwyn


Brocklebank-Fowler, C.
Hamilton, Hon A.


Brooke, Hon Peter
Hamilton, Michael (Salisbury)


Brotherton, Michael
Hampson, Dr Keith


Brown, M. (Brigg and Scun)
Hannam, John


Browne, John (Winchester)
Haselhurst, Alan


Bruce-Gardyne, John
Hastings, Stephen


Bryan, Sir Paul
Havers, Rt Hon Sir Michael


Buchanan-Smith, Hon Alick
Hawkins, Paul


Buck, Antony
Hawksley, Warren


Budgen, Nick
Hayhoe, Barney


Bulmer, Esmond
Heath, Rt Hon Edward


Burden, Sir Frederick
Heddle, John


Butcher, John
Henderson, Barry


Carlisle, John (Luton West)
Heseltine, Rt Hon Michael


Carlisle, Kenneth (Lincoln)
Hicks, Robert


Carlisle, Rt Hon M. (R'c'n)
Higgins, Rt Hon Terence L.


Chalker, Mrs. Lynda
Hill, James


Channon, Rt. Hon. Paul
Hogg, Hon Douglas (Gr'th'm)


Chapman, Sydney
Holland, Philip (Carlton)


Churchill, W. S.
Hooson, Tom


Clark, Hon A. (Plym'th, S'n)
Hordern, Peter


Clark, Sir W. (Croydon S)
Howe, Rt Hon Sir Geoffrey


Clarke, Kenneth (Rushcliffe)
Howell, Rt Hon D. (G'ldf'd)


Clegg, Sir Walter
Howell, Ralph (N Norfolk)


Cockeram, Eric
Hunt, David (Wirral)


Colvin, Michael
Hunt, John (Ravensbourne)


Cope, John
Hurd, Hon Douglas


Cormack, Patrick
Irving, Charles (Cheltenham)


Corrie, John
Jenkin, Rt Hon Patrick


Costain, Sir Albert
Jessel, Toby


Cranborne, Viscount
Johnson Smith, Geoffrey


Critchley, Julian
Jopling, Rt Hon Michael


Crouch, David
Joseph, Rt Hon Sir Keith


Dean, Paul (North Somerset)
Kaberry, Sir Donald


Dickens, Geoffrey
Kellett-Bowman, Mrs Elaine


Dorrell, Stephen
Kershaw, Anthony


Dover, Denshore
Kimball, Marcus


Dunn, Robert (Dartford)
King, Rt Hon Tom


Durant, Tony
Kitson, Sir Timothy


Dykes, Hugh
Knight, Mrs Jill


Eden, Rt Hon Sir John
Knox, David


Edwards, Rt Hon N. (P'broke)
Lamont, Norman


Eggar, Tim
Lang, Ian


Elliott, Sir William
Langford-Holt, Sir John


Emery, Peter
Latham, Michael


Eyre, Reginald
Lawson, Nigel


Fairgrieve, Russell
Lee, John


Faith, Mrs Sheila
Lennox-Boyd, Hon Mark


Farr, John
Lester Jim (Beeston)


Fell, Anthony
Lewis, Kenneth (Rutland


Fenner, Mrs Peggy
Lloyd, Ian (Havant &amp; W'loo)


Finsberg, Geoffrey
>Lloyd, Peter (Fareham)


Fisher, Sir Nigel
Loveridge, John


Fletcher, A. (Ed'nb'gh N)
Luce, Richard


Fletcher-Cooke, Sir Charles
Lyell, Nicholas


Fookes, Miss Janet
McCrindle, Robert


Fowler, Rt Hon Norman
Macfarlane, Neil


Fox, Marcus
MacGregor, John


Fraser, Rt Hon Sir Hugh
MacKay, John (Argyll)


Fraser, Peter (South Angus)
Macmillan, Rt Hon M.


Fry, Peter
McNair-Wilson, M. (N'bury)


Galbraith, Hon T. G. D.
McNair-Wilson, P. (New F'st)


Gardiner, George (Reigate)
McQuarrie, Albert


Gardner, Edward (S Fylde)
Madel, David





Major, John
Scott, Nicholas


Marland, Paul
Shaw, Giles (Pudsey)


Marlow, Tony
Shaw, Michael (Scarborough)


Marshall Michael (Arundel)
Shelton, William (Streatham)


Mates, Michael
Shepherd, Colin (Hereford)


Mather, Carol
Shepherd, Richard


Maude, Rt Hon Sir Angus
Shersby, Michael


Mawby, Ray
Silvester, Fred


Mawhinney, Dr Brian
Sims, Roger


Maxwell-Hyslop, Robin
Skeet, T. H. H.


Mayhew, Patrick
Smith, Dudley


Meyer, Sir Anthony
Spence, John


Miller, Hal (B'grove)
Spicer, Jim (West Dorset)


Mills, Iain (Meriden)
Spicer, Michael (S Worcs)


Mills, Peter (West Devon)
Sproat, Ian


Miscampbell, Norman
Squire, Robin


Mitchell, David (Basingstoke)
Stainton, Keith


Moate, Roger
Stanbrook, Ivor


Monro, Hector
Stanley, John


Montgomery, Fergus
Steen, Anthony


Moore, John
Stevens, Martin


Morgan, Geraint
Stewart, Ian (Hitchin)


Morris, M. (N'hampton S)
Stewart, A. (E Renfrewshire)


Morrison, Hon C. (Devizes)
Stokes, John


Mudd, David
Stradling Thomas, J.


Murphy, Christopher
Taylor, Teddy (S'end E)


Myles, David
Tebbit, Norman


Neale, Gerrard
Temple-Morris, Peter


Needham, Richard
Thatcher, Rt Hon Mrs M.


Nelson, Anthony
Thomas, Rt Hon Peter


Neubert, Michael
Thompson, Donald


Newton, Tony
Thorne, Neil (Ilford South)


Nott, Rt Hon John
Thornton, Malcolm


Onslow, Cranley
Townend, John (Bridlington)


Oppenheim, Rt Hon Mrs S.
Townsend, Cyril D, (B'heath)


Osborn, John
Trippier, David


Page, John (Harrow, West)
Trotter, Neville


Page, Rt Hon Sir G. (Crosby)
van Straubenzee, W. R.


Page, Richard (SW Herts)
Vaughan, Dr Gerard


Parris, Matthew
Viggers, Peter


Patten, Chirstopher (Bath)
Waddington, David


Patten, John (Oxford)
Wakeham, John


Pattie, Geoffrey
Waldegrave, Hon William


Pawsey, James
Walker, Rt Hon P. (W'cester)


Percival, Sir Ian
Walker, B. (Perth)


Peyton, Rt Hon John
Walker-Smith, Rt Hon Sir D.


Pink, R. Bonner
Waller, Gary


Pollock, Alexander
Walters, Dennis


Porter, Barry
Ward, John


Prentice, Rt Hon Reg
Warren, Kenneth


Price, Sir David (Eastleigh)
Watson, John


Prior, Rt Hon James
Wells, John (Maidstone)


Proctor, K. Harvey
Wells, Bowen


Pym, Rt Hon Francis
Wheeler, John


Raison, Timothy
Whitelaw, Rt Hon William


Rathbone, Tim
Whitney, Raymond


Rees, Peter (Dover and Deal)
Wickenden, Keith


Rees-Davies, W. R.
Wiggin, Jerry


Renton, Tim
Wilkinson, John


Rhodes James, Robert
Williams, D. (Montgomery)


Rhys Williams, Sir Brandon
Winterton, Nicholas


Ridsdale, Sir Julian
Wolfson, Mark


Rifkind, Malcolm
Young, Sir George (Action)


Roberts, M. (Cardiff NW)
Younger, Rt Hon George


Roberts, Wyn (Conway)



Rossi, Hugh
Tellers for the Noes:


Rost, Peter
Mr. Spencer Le Marchant


Royle, Sir Anthony
and Mr. Anthony Berry


Sainsbury, Hon Timothy

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments), and agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House recognises the realism of the Government's energy policy and welcomes the renewed vigour with which the nation's energy resources are being developed.

Orders of the Day — Rate Support Grant (Scotland)

The Secretary of State for Scotland (Mr. George Younger): I beg to move,
That the Rate Support Grant (Scotland) Order 1980, a copy of which was laid before this House on 18 December. be approved.
As the House knows, it is essential in the national interest that public expenditure should be reduced. Local authority expenditure is a large and important component of this. Indeed, local authority current expenditure in Scotland represents some 40 per cent. of public expenditure for which I am responsible. The upward trend in local authority current expenditure is a matter of acute concern, especially the prospect of substantial increases in some local authority spending plans. Once again I commend the wise counsel offered by the right hon. Member for Glasgow, Craigton (Mr. Millan) in December 1976 to the effect that local authority staff numbers should not have increased and that such increases in expenditure on particular services as local authorities desired should have been offset by expenditure reductions elsewhere. Of course we all want more services in many fields, but to produce these, however desirable they may be, at the expense of ruining national or local finances would be irresponsible folly.
It is quite ridiculous to suggest that the reductions that I am calling for will decimate local services. If only what I have asked for is achieved, it could bring spending under this order only to little above the level actually spent in the year 1977–78. I might be mistaken but I do not recall the right hon. Member for Craigton telling us in that year that the level of spending which he was allowing was in any way inadequate.
Moreover, my proposals allow for improvements, for example in education—the largest single service in this context. My proposals for 1981–82 allow for pupil teacher ratios falling from 23·3:1 to 21·9:1 in primary schools, and from 15·4:1 to 14·7:1 in secondary schools compared with the settlement in 1977–78. What I am asking local authorities to do is to cut back on the growth since 1977–78. That means this year a reduction in aggregate expenditure to a level 2·7 per cent. lower than that on which the 1980–81 settlement was based. The reduction in local authority expenditure for Great Britain as a whole is 3 per cent.
I have been able to ask for a lower reduction in the current expenditure of Scottish local authorities by contributing some savings from my own expenditure within the Scottish block to ease the burden on them. The Convention of Scottish Local Authorities has been comparing this reduction, not with last year's expenditure but with its own initial budgets for 1980–81. As the House knows, these were far higher than could possibly be afforded, and I have asked local authorities to contain their expenditure this year to a level consistent with the settlement. I am glad to say that authorities responsible for the bulk of the expenditure are taking active steps to do so, and I urge all others to do so without delay.
At this point I pay tribute to all authorities which have been doing everything in their power to follow the Government's advice since we assumed office and which

have planned for moderate levels of expenditure in the current financial year. I warmly commend their sense of responsibility, their clear perception of the public interest and the difficult task that they are taking on. Some have produced 1980–81 budgets within the indicative guidelines which we produced. Many others exceeded the guidelines only marginally and have conducted themselves with great good sense. I trust that in the outturn their expenditure will demonstrate this.
There is another side to the coin. Some authorities chose, in 1980–81, to ignore the Government's advice and planned for significant growth in services which, however desirable in benign economic circumstances, is unjustifiable at the present time. Thus, total expenditure planned by authorities was initially about 4·9 per cent. above the level proposed in the 1980–81 grant settlement. After consultations with the convention I understand that the prospective excess has been moderated since many authorities appear to have heeded my advice in the course of the year. But any authority which fails to do so will face a commensurately more difficult task in reducing expenditure in 1981–82. It will have only itself to blame for that problem if it meets it.
The Government will not flinch from taking measures to bring the expenditure of such authorities into line with national economic requirements. My proposals to reduce grant progressively to authorities which plan for an excessive and unreasonable level of expenditure are currently subject to debate in proceedings on the Local Government (Miscellaneous Provisions) (Scotland) Bill. I would add only this: subject to parliamentary approval, will, if it should prove necessary, use those powers to reduce grant selectively with resolution and with vigour. Besides, I already have powers to act on outturn expenditure if it is excessive and unreasonable.
The Government's main concern is with the aggregate level of expenditure planned and incurred by authorities. But I must also pay close attention to staff costs, which account for nearly 70 per cent. of total current expenditure. Recent trends must give everyone considerable cause for concern. In September 1980, authorities as a whole were employing some 2,000 staff more than in September 1979, 4,000 more than when this Government assumed office and no fewer than 15,000 more than in December 1977. These are overall totals. I am glad to say that some authorities are acting more reasonably. For instance, Strathclyde regional council has effected manpower reductions since last year, although there is still a net increase since the Government first sought staff economies.
On the other hand, it is noteworthy that nearly half the total increase between September 1979 and 1980 is attributable, by its own public statements—if nothing else—to the eccentric policies followed by one particular authority. At a time when the private sector as a whole, and virtually every individual, is having to exercise restraint and good sense in expenditure matters, a continuing increase in the local authority payroll, the costs of which are met entirely by the taxpayer and the ratepayer, cannot be justified, and cannot fail to cause severe damage to businesses and loss of jobs, not to mention the unacceptable burden that it will place on individual ratepayers.

Mr. Dennis Canavan: On the matter of loss of jobs, does the Secretary of State realise


that there are already more than ¼ million people unemployed in Scotland? What effect will the rate support grant have upon unemployment arising from local government redundancies? Has he any estimate of that? Does he not realise that this niggardly rate support grant order will lead to further unemployment in Scotland?

Mr. Younger: Further increases in staff on the lines of what has taken place, let alone any decreases, will result in literally thousands more redundancies in the private sector, which is the only thing that pays the cost of all these expenditures. The hon. Gentleman must face the fact that every job in the public sector is paid for by someone in the private sector. That is what is putting jobs in his and other Members' constituencies out of being at the present time.

Mr. John Maxton: Does the right hon. Gentleman accept that it is not only in the public sector and local authorities that redundancies will take place as a result of this rate support grant? If local authorities have to cut back their expenditure, many small private companies, which this Government were elected to support, will go to the wall, with further redundancies, because they rely almost entirely upon local authority business to continue?

Mr. Younger: With respect, the hon. Gentleman ought to speak to some small companies. What is worrying them more than anything else at the moment is the rising level of rates being forced upon them by irresponsible authorities. If the hon. Gentleman has not discovered that, he had better discover it quickly, because many businesses of that kind will be put out of business unless rate increases are kept at a reasonable level.
I turn to the main provisions of the order. The rate support grant for 1981–82 will be derived from a total of relevant expenditure 2·7 per cent. less than the corresponding figure in 1980–81—£2,458·5 million at November 1980 prices. Before determining that figure I undertook a painstaking review, after consultation with the Convention of Scottish Local Authorities, of the scope for reductions in individual services. My conclusions on individual services are not binding on authorities which may incur current expenditure in accordance with local priorities. My overriding concern is that the aggregate of expenditure should not exceed the overall provision on which the settlement is based. Nevertheless, I hope that the proposals in paragraphs 7–17 and in appendix C to the report on the order will help authorities to determine expenditure levels for individual services and to contain the aggregate level.
The Government propose that a substantial part of the overall reduction should be found in provision for education. But it would be wrong to infer from that that I envisage a reduction in standards. As noted in paragraph 8, the expenditure reduction is less than the reduction indicated by falling rolls, to which it is mainly attributable. Thus we will be making considerable savings in total expenditure but actually spending more per pupil and still further improving the pupil-teacher ratio, as I described a few minutes ago.
Otherwise, substantial reductions are concentrated in less essential services, such as leisure and recreation, and in provision for miscellaneous services. A substantial reduction in planning expenditure is attributable mainly to the introduction of charges. Provision for law, order and protective services is maintained at the 1980–81 level,

reflecting the high priority that this Government accord to this important factor. Provision for social work is increased by 1 per cent.
The underlying theme may be summarised in this way. The overall reduction is vital in the national interest at a time when our national resources are declining, and both private individuals and the private sector are all having to face up to saving money wherever they can. It would be absurd and most unfair for local authorities to be exempted from making savings similar to those which everyone else is having to make. But within this it is perfectly possible—and this is what we have done—to concentrate savings on the less essential and preserve spending on the essential services to a very great extent. I have no doubt that this general order of priorities will have widespread public support.
The percentage by which grant is calculated for relevant expenditure reflects an actual reduction compared with 1980–81 of 1 per cent. A further adjustment of 0·8 per cent replaces an ad hoc abatement made since 1978 in respect of rates on local authority properties. This is COSLA's preferred solution. It will have no effect on the grant received by local authorities. That gives a grant percentage of 66·7 per cent. and aggregate grants for 1981–82, based on expenditure at November 1980 prices, will be £1,639·8 million. Of this total, rate support grant will account for £1,503·1 million and specific grants for £136·7 million.
As in previous years, there will be a cash limit on additional grant for 1981–82 towards pay and price increases beyond November 1980 prices. The cash limit figure of £94 million includes provision for increases of no more than 6 per cent. on average in pay settlements in this round and provisionally for the next round, and for price increases of no more than an average of 11 per cent. between 1980–81 and 1981–82. Total grant payable through increase orders may be above or below the figure of £94 million to take account of variations in expenditure due to changes in interest rates, which are not subject to cash limits. Provision is also made for the payment of additional grant towards cost increases for 1979–80, amounting to £24·5 million, and for 1980–81, amounting to £203·1 million.

Mr. John Home Robertson: The Secretary of State referred to the wage increases being allowed in the public sector under the present policy, increases of 6 per cent. Would he care to comment on the fact that one of the local authorities that he would term reasonable, though I would disagree—the Borders regional council—has already announced that a rate increase of 18 per cent. is likely, which is three times the percentage of the pay policy that he is applying in the public sector?

Mr. Younger: The hon. Gentleman is magnificently confused on all matters contained in his question. First, the 6 per cent. is the amount that the Government can contribute towards local authorities' pay bills. It is the amount that the public can afford to spend in assisting local authorities towards that expenditure. Local authorities have the discretion to decide what they pay and what they provide from their own resources if they wish to do so. Secondly, I am extremely surprised that the hon. Gentleman, of all people, is complaining that the Borders region has announced a tentative rate increase of about 18 per cent. when the other local authority within his


constituency is talking today about positively staggering rate increases of 40 per cent. or more. If the hon. Gentleman wants to exercise his undoubted debating skills on anyone, he might try them on his local friends before he tries them on anyone else.
My arrangements for distributing grant in 1981–82 are generally similar to those adopted in 1980–81. Domestic relief will remain at 3p in the pound, and the scheme for special assistance to authorities affected by oil-related development will continue with a first payment in 1981–82 of £10·8 million. I have decided again, as for 1980–81, to reduce the resources element entitlement, which is affected by individual decisions on rating levels, to reduce any possible disincentive to economy within the grant arrangements.
The formula for distribution of the needs element—that is the general portion—will be as endorsed by the convention during my consultations with it, subject to minor adjustments consistent with the agreed objective of stability.
The estimated effect of my proposals on the relative position of individual authorities and of whole regions is, with a few exceptions, not substantial provided that the present pattern of relative rate levels is maintained. Thus an authority which budgets for substantial increases in expenditure and which rates accordingly will receive less resources than it would have received under an unchanged ratio, so that a lower percentage of its total expenditure will be met by grant.
As previously, I do not propose to offer a firm prediction of the average level of rate increases in 1981–82, a custom followed by my predecessor as well. The level will depend entirely on decisions reached by individual authorities when they complete their budgets in the course of the next few weeks.

Dame Judith Hart: How does the right hon. Gentleman reconcile philosophically the Government's monetarist policies and commitments with their commitment to individual democracy and the freedom of local government? The two approaches are totally in conflict.

Mr. Younger: If I may say to the right hon. Lady—

Mr. John Home Robertson: Answer the question.

Mr. Younger: Indeed, I propose to do so. I am grateful to the hon. Gentleman for his advice. I am not quite sure what the right hon. Lady means when she refers to monetarist policies. However, it is clear that it is the role—it will remain the role under all Administrations—of the central Government to decide how much the central Government and the taxpayer can afford to spend in assisting local authorities to do their job. That is what I am doing. That is our job. That is our responsibility. It is the local authorities' responsibility to decide beyond that what they think their ratepayers can afford to provide. Although I do not agree with the decisions that many authorities take, they must stand by their decisions and they must take the consequences if they rate so excessively that their ratepayers reject them, as I am sure that many of them will.

Mr. Robert Hughes: I have listened to the right hon. Gentleman with great care. No one would disagree that the central Government have a

responsibility to make available whatever they can afford and to leave the rest to local authorities' judgment. However, I understand that he is changing the formula of the needs element so that if authorities go beyond the guidelines and cash limits he will be able to penalise them for exercising their judgment. How does he square that settlement?

Mr. Younger: First, it is nothing to do with the needs element. I am changing the formula because I cannot see why the public purse should subsidise directly those authorities that spend the greatest amounts at the expense of prudent authorities that take care not to over-spend and not to put excessive strain on their ratepayers. It would, indeed, be a Gilbert and Sullivan operation if we were to give extra help to those which were the most extravagant, and I do not think that anyone would want that.

Mr. Ernie Ross: The Secretary of State says that he wants to help those local and regional councils which have carried out his policies. I quote from the Dundee Courier and Advertiser of last Monday:
Mr. Ian Mackie, the Tory council's leader of the administration, was in an angry mood last night about what he termed the 'completely inadequate' allocation of £103·5 million from the Government.
That is a Tory-controlled region, having carried out the right hon. Gentleman's policies, saying that his allocation is totally—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. Interventions should be brief.

Mr. Younger: I am not quite sure what the hon. Gentleman is saying, but if he has overnight suddenly become a great supporter of the policies of Tayside regional council I shall be extremely pleased, because it is one of the best and most responsible local authorities in its expenditure. That is not just my view. I am pretty certain that it is the view of the right hon. Member for Craigton, because that authority gave him more help than did half the Labour-controlled authorities in Scotland when he was in my position.
As for what the hon. Gentleman's reference to what was said in the newspapers this week, as I understand it Tayside regional council has not yet finalised its budgets, and the remarks reported in the newspaper referred to guidelines. Tayside's guidelines are in the same position as everyone else's: they are merely guidelines, and they are not anything that anyone has to achieve or stick by. They are guidelines intended to help. As I say, if the hon. Gentleman is now paying tribute to Tayside for its responsible attitude to local spending, I am glad that he is at last doing so. It is about time.
Expenditure is the main key to the rate levels that we expect to see in the coming year. I have given authorities a positive lead in this matter in the terms of the grant settlement embodied in the order. Provided that authorities budget reasonably in line with the volume of expenditure assumed in the settlement and pursue a moderate policy towards wage settlements, there will be no need for undue rate increases, and the average level of increase should be considerably below that imposed by authorities in 1980–81. But if authorities plan for a substantially higher volume of expenditure and contemplate average increases in the earnings of local authority employees substantially beyond 6 per cent., higher rate increases will be inevitable. It is accordingly for authorities as employers


to reach their own decisions on the level of individual settlements with a clear understanding of the Government's position, and how much the Government can afford to give them in the way of help. If they adopt the easy option of higher overall settlements, they will have to accept full responsibility for the consequences which will fall upon their ratepayers.
The general theme of what I have said has been that the settlement embodied in the order is fair and realistic, striking a good balance between the interests of the recipients of local authority services on the one side, and the national economic interest, on the other. It envisages a generous, although reduced, level of expenditure by authorities. It proposes a judicious disposition of reductions between services. It offers a realistic level of support by the taxpayer. It features a carefully balanced system of distributing grant, taking due account of the views advanced by the Convention of Scottish Local Authorities. It enjoins authorities to accept a due measure of responsibility for controlling costs—

Mr. Robin F. Cook: Will the right hon. Gentlemen give way?

Mr. Younger: Yes, of course.

Mr. Cook: I am much obliged. The right hon. Gentleman will recall that in his answer to my hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) he said that it was for the local authorities to decide how much they could pay in wage settlements with their employees, and he added that that was a matter for them to resolve, taking into account their rate settlement.
The right hon. Gentleman cannot have it both ways, saying that it is a matter for the local authorities themselves, and them insisting, as he was obviously doing in the most recent passage of his speech, on a 6 per cent. settlement. Will he come clean and give the House—we are entitled to it—his own view on whether the local authorities should have settled on an 18 per cent. increase for the firemen or whether they should have settled, as appears to have been the drift of his last paragraph, for 6 per cent? The House must—

Mr. Deputy Speaker: Order.

Mr. Younger: I shall try once more to explain the precise position to the hon. Gentleman and to others who are obviously confused. It is my duty and my task to make clear what the public purse can afford to pay to help local authorities with their wage settlements. That is my responsibility, and I have laid down that the public purse can afford to pay for wage increases of 6 per cent. It is for local authorities to decide whether they wish to choose that figure, a figure below that or a figure above it. It is for them to provide the resources that are necessary, taking into account how much the Government can afford to pay to help them.
Whatever else one may say, and whether or not one agrees with it, that is a perfectly clear statement. I do not think that anyone could be in any doubt that it is the Government's contribution about which I am talking, and it is my responsibility—and only mine—to say what the Government can afford to do to help local authorities.

Mr. Dick Douglas: rose—

Dr. M. S. Miller: rose—

Mr. Younger: I have to choose between Scylla and Charybdis I shall choose Scylla.

Mr. Douglas: I am not sure whether I should be flattered by the Secretary of State's remark.
Is he saying that in the light of the expertise that is available to him, he is entitled to take a view of the national economic resources that inhibits a growth of wages and salaries to 6 per cent., and that the local authorities are entitled to take an entirely different view on the basis of their resources? Through an accident of this Parliament, he wills the end of the services that can be provided in many cases by the local authorities. Why is he inhibited from willing the means also?

Mr. Younger: I am not certain where that question started and finished. The hon. Gentleman will appreciate more easily than most that two different components make up the total amount of what it will cost local authorities to pay their employees. All I am obliged to do is to give a clear indication in good time of how much the Government can afford to pay to help local authorities. I have done that. They know what it is, and they can make their decisions with that in mind.

Dr. M. S. Miller: rose—

Mr. Younger: I am sorry, I must finish my remarks. [HON. MEMBERS: "Give way."] If I give way, it will prevent other hon. Members from speaking. [Interruption.] I give way.

Dr. Miller: Does not the Secretary of State appreciate that, cutting through all the rhetoric and the fine phrases, whatever happens there will be a cutback in the essential services that local authorities provide? Does not the right hon. Gentleman appreciate that that is despicable on a matter to which the Government should be contributing in this International Year of Disabled People?

Mr. Younger: As I have explained, there is no reason why any essential services should be abolished or removed because of this settlement. If local authorities decide in their priorities that essential services should suffer it is their decision. I have made it perfectly clear, and it is clear from the fact that the amount of money is the same or rather more in real terms than the Secretary of State provided in 1977–78. No one can say that local authorities must cut essential services. A properly organised local authority will be able to make the necessary economies by cutting the less essential services.
Of course this settlement involves a saving of money. Of course it involves cuts on some of the activities of local authorities. They are in no different a position from that of everyone else in the country—individuals, businesses, everyone who is going through a period of economic difficulty. I see no reason whatever why local authorities should be exempted. The good and efficient local authorities are having no difficulty in making cuts.
I hope that the House will now approve the order.

Mr. Bruce Millan: This is a short debate and, therefore, I shall not take time by complaining at length about the timing of it. It is, however, highly unsatisfactory that we should be having first the rate support grant debate and then, following that, the housing support grant debate at this time of night. We have complained about that, we consider it to be highly unsatisfactory and, speaking for the Opposition, I am


absolutely determined that we shall not have another year in which we shall debate these extremely important matters at this ridiculous time of night.
As it is a short debate, I shall try to confine my remarks as much as I can, but I want to deal with the question in which every ratepayer, whether he is a householder or an industrial or commercial ratepayer, is most interested—namely, what is to be the increase of rates in 1981–82.
When we debated last year's rate support grant order, about a year ago, the Secretary of State, as he has done tonight, tried to convince the House that increases in rates would be at comparatively modest levels, but he refused to give a specific forecast. I gave forecasts a year ago. I said that I could not see how rates in Scotland as a whole could come out with an average increase of anything less than between 25 and 30 per cent. and that I believed that in many authorities it would be considerably more. In the current year, the average rate increases in Scotland have been no less than 32 per cent.
I put on record now that it is my view that the ratepayers of Scotland, because of this rate support grant settlement, and directly on the responsibility of the Government, are facing in 1981–82 rate increases which will again certainly approach the 32 per cent. that they have already borne in the current year. The responsibility is absolutely that of the Government. The Secretary of State can try as he will to place the responsibility on profligate local authorities, but the average increase in Scotland as a whole in 1981–82 will be a savage increase, and that will severely affect not only domestic ratepayers but industrial and commercial ratepayers.
Why is there to be this massive increase in the next year? First, there is the cut in the percentage grant of only 1 per cent. That seems modest, but it will mean a 3 per cent. increase at least in rates in Scotland.
Secondly, there is the normal inflation rate—because, whatever the rate of inflation, other things being equal, the rates will go up by something like the same percentage—and my estimate is that that will be at least another 10 per cent. increase, a very modest estimate, in the forthcoming year. It may well be a good deal more than that.
Thirdly, and even more important, the rate increases will be very substantial because the relevant expenditure on which the rate support grant is being paid is completely unrealistic. What is more, the Secretary of State, despite all his blustering tonight, knows that it is completely unrealistic. He talks about a decrease in relevant expenditure of only 2·7 per cent., but that is, of course a decrease on what he was told last year would prove a completely unrealistic figure. It is a reduction of 2·7 per cent. on the artificial figure that was in last year's rate support grant order. We know, however, that if we compare the relevant expenditure on which grant is being paid for 1981–82 with the actual local authority budgets of the current year, the reduction is not 2·7 per cent.; it is 7·2 per cent.
I state now absolutely categorically that there is not the slightest chance of the local authorities in Scotland reducing their relevant expenditure in 1981–82 by 7·2 per cent. or anything like it, compared with the figures for which they have budgeted in the current year. In so far as they are not able to make that reduction—there is not the

slightest chance that they will come anywhere near that, as the Secretary of State knows perfectly well—the burden will fall exclusively on the ratepayers and will mean very considerable increases in rates.
The Secretary of State would like to pretend that the problem has been caused by a lot of profligate authorities. He would like to pretend that if they made a little effort they could reduce their expenditure to the figures that he has provided for in the order. I do not believe that for one minute. What is more, the Convention of Scottish Local Authorities, which includes Conservative-controlled local authorities, does not believe that.
Local authorities have a much better record than the Government—including this Government—of keeping public expenditure under control. There is a lot of humbug and hypocrisy when the Secretary of State talks about the manpower figures. He is fond of boasting in a self-righteous way that the Scottish Office has kept down its manpower figures. However, the right hon. Gentleman always excludes the prison service and State hospital, which are the only departments within the Scottish Office that are directly involved in providing services to Scottish ratepayers
It would be very nice if local authorities could, for example, exclude from their manpower figures teachers, firemen, social workers and those who repair council houses. Local authority manpower figures would be very different if such direct services were excluded from the calculations. Since 1 April 1979, manpower for direct services in the Scottish Office has increased. There has been a minimal reduction in overall manpower in the Scottish Office. If the bureaucrats, administrators and those who sit in offices are excluded, manpower in the direct services for which the right hon. Gentleman is responsible—the prison service and State hospital—has increased since May 1979. The Secretary of State does not seem to know that. He is asking for figures to be supplied from the Box.
I am complaining not about that increase but about the self-righteous way in which the Secretary of State criticises local authorities. They also provide direct services to ratepayers. They supply teachers, policemen, firemen, social workers and so on. In principle, I do not disagree with keeping public expenditure under control, but the record of Scottish local authorities is much better than that of the Government.
These major rate increases have been imposed not only—as the right hon. Gentleman knows—because the expenditure on which the grant is based is unrealistic but because the inflation factors for 1981–82 are as dishonest as they were for 1980–81. Indeed, the situation in 1980–81 was a major item in the debate on last year's rate support grant order. Local authorities tend to overbudget and to underspend, but those authorities that took the right hon. Gentleman's inflation factors for the current year into account when fixing the rates will face massive deficits at the end of the year. Those deficits will have to be carried forward into 1981–82. That is a disaster for Scottish ratepayers.
In 1980–81, the cash limit amounted to £194 million. If COSLA's figures are in dispute or are inaccurate, the Secretary of State can let us know at the end of the debate; but he will not say that they are inaccurate, because they are beyond dispute. According to COSLA's figures, the underlyig increases for inflation represented by the cash limits fixed for 1980–81 amounted to about £307 million.


In 1980–81, actual inreased costs which are completely outside the control of local authorities were £390 million, even if increased loan charges are not taken into account. Every penny of that additional expenditure has fallen directly on the ratepayers. The Government have swindled local authorities out of their share of that increased expenditure.
One does not have to rely on the COSLA figures. One can look at the Secretary of State's own figures in the rate support grant order. I invite Conservative Members, if they are sceptical, to look at page 11 of the report on the order. They will see that the figures for 1981–82, when compared at November 1979 and November 1980 prices, show inflation that local authorities have had to pay over the current year of rather more than 25 per cent. The factor for which allowance was made in the rate support grant settlement last year was only 13 per cent. plus an undisclosed figure for comparability settlements in pay.
This massively increased inflation is the responsibility of the Government. It is not the responsibility of the local authorities. Yet it has been paid by the local authorities and, therefore, by the ratepayers of Scotland in 1980–81. What has happened in 1980–81 will happen again in 1981–82 because of the unrealistic cash limit figures written into the order for 1981–82. The Secretary of State gave the figures. For wages and salaries, the figure is 6 per cent. For other expenditure, the figure is about 11 per cent.
I should like to examine the figure for wages and salaries to see what it means in reality. The commitments that the local authorities already have to take on board following the fire service settlement, the manual workers's settlement and other settlements—

Mr. Canavan: And the police.

Mr. Millan: No, not the police. I am coming to the police. My hon. Friend should be patient. The commitments already taken on by the local authorities for 1981–82 for the fire service and for manual workers mean that the money left available in this rate support grant for additional wages and salaries for 1981–82 amounts, on average, to only 4½ per cent. That takes account only of the settlements already made. Does the Secretary of State honestly believe that on 1 April 1981 the teachers will settle for 4½ per cent.?

Mr. Canavan: No chance.

Mr. Millan: Does the right hon. Gentleman believe that the policemen, in the autumn of 1981, will settle for 4½ per cent.? Will he answer the question? Will his Under-Secretary of State answer the question? There is not the slightest chance of either the teachers or the policemen settling later this year in their annual settlements for salary increases of anything like 4½ per cent.

Mr. Younger: Will the right hon. Gentleman remind the House what was the cash limit for pay in his last settlement? How nearly accurate did it turn out to be?

Mr. Millan: There were no cash limits under the Labour Government that ever left local authorities with a massive burden placed on the ratepayers. Will the Secretary of State answer the question I have put? Does he expect the teachers and the policemen to settle in 1981 for a 4½ per cent. salary increase? I will give way again. I have given way once. Will he give the answer?

Mr. Younger: The right hon. Gentleman knows that I do not take part in these negotiations. I have tried to

explain several times that the local authorities negotiate in these matters. I have let them know, as the right hon. Gentleman did before me, how much the Government can afford to pay to help them with this.

Mr. Millan: That is an absolutely appallingly dishonest answer. [HON. MEMBERS: "Oh."] First, the Secretary of State takes part in the teachers' negotiations. He is part of the management side in them. Does he expect the teachers or the police to settle for 4½ per cent? Of course not. The result of whatever these settlements are beyond 4½ per cent. will be a further burden on the ratepayers. That is his direct responsibility. That is the reality of the situation. The Secretary of State may wriggle as much as he wishes, but the responsibility is his.

Mr. Barry Henderson: rose—

Mr. Millan: It is not the responsibility of the hon. Member for Fife, East (Mr. Henderson). The Secretary of State will not answer these questions, but he knows that, as the result of the cash limits in this RSG settlement, these additional salary settlements which will be reached in 1980–81 will mean that vast sums will fall directly on the ratepayers and will be an important contributory factor in the very large increases in rates that we shall see in 1981–82.

Mr. Henderson: Will the right hon. Gentleman give way?

Mr. Millan: No. I have great regard for the hon. Member for Fife, East.

Mr. Henderson: Well, give way then.

Mr. Millan: No. The hon. Member is not yet the Secretary of State—not that he would not be an improvement.
We are having artificial figure piled on artificial figure. The figures in this order for 1981–82 bear no relation whatsoever to the reality of the situation facing local authorities and ratepayers in Scotland, and they bear no relation to the burdens that will be placed on the ratepayers of Scotland in 1981–82.
I shall not deal in detail with the commentary on particular services outlined in the report on this settlement. I dare say that some of my hon. Friends will want to deal with education and a number of other services. However, looking at the commentary and at what the Secretary of State asks us to believe he expects will happen with regard to these services in 1981–82, the unreality and artificiality are evident.
The result for 1981–82 will be as it has been for 1980–81. I repeat: the responsibility is the Government's. It is that we shall have massive rate increases in the forthcoming year. They will vary between areas and between regions. I believe that the biggest increases in the current year will be at regional rather than district level. I dare say that the Secretary of State and his cohorts will take what little comfort they can from the particular authorities at regional or district level which manage to keep rate increases next year down to a reasonable level. But the fact is that the overall Scottish position in the forthcoming year, taken as a whole, will be a very considerable increase in rates, to something approaching the massive and savage increases of more than 30 per cent. that we have had in the current year.
That will be accompanied by poorer services in education, for the elderly, for the disabled and so on. [Interruption.] We can have it both ways. That is the problem. We are having higher rates and poorer services.
To add insult to injury, we have the provisions in the Local Government (Miscellaneous Provisions) (Scotland) Bill, which will put penalties on local authorities which try to preserve services at a reasonable level. Local authorities will be acting perfectly legitimaately, because there is no economic or other reason for the kind of reductions in public expenditure for which the Secretary of State is asking. The local authorities will be faced with penalties under that Bill.
I am glad to see that the Convention of Scottish Local Authorities, including Conservative-controlled authorities, is unanimously against the Bill's provisions. They rightly see it as an attack on local democracy and local decision-making. If the Secretary of State thinks that the penalty powers will be a boon to ratepayers or if the ratepayers think that the powers will produce anything good for them, they could not be more wrong. If the penalties are applied—I sincerely hope that they will not be—they will increase rates by even greater amounts than they will go up in any case as a result of the order. The penalty will fall directly on the unfortunate ratepayers.

Mr. David Myles: Will the right hon. Gentleman give way?

Mr. Millan: I am about to finish.

Mr. Myles: On a point of order, Mr. Deputy Speaker—

Mr. Deputy Speaker: The right hon. Gentleman is refusing to give way, and I fail to see how there can be a point of order in that.

Mr. Myles: On a point of order, Mr. Deputy Speaker. I accept your ruling, but the right hon. Member for Glasgow, Craigton (Mr. Millan) is misleading the House.

Mr. Deputy Speaker: That is not a point of order.

Mr. Millan: If misleading the House were out of order, the Secretary of State would not have been allowed to speak at all.
For domestic ratepayers the order is another burden placed on their shoulders. The ordinary householder has seen the tax concessions of the first Budget of 1979—if he was fortunate enough to receive any of them—disappear, as the Government now admit. If he is a council tenant, he has seen his rents forced up by unprecedented amounts. If he is an owner-occupier, he has seen his mortgage increased to unprecedented levels. He has seen the inflation rate maintained at 15 per cent. and gas and electricity prices pushed up and he faces, for the second year running, massive increases in rates.
If he is a commercial or industrial ratepayer, he is already suffering from high interest rates, overvalued sterling and the deflationary policies of the Government. Indeed, he is lucky if he has escaped bankruptcy and unemployment. Now, he will be faced with massive increases in his rates. I am not surprised that he is worried about the prospects for 1981–82. The order will add to the havoc of bankruptcies and unemployment that we are already suffering in Scotland.
I say to every domestic ratepayer and to the House that the disaster has been created by the Government, and, typically, the order has been brought forward, as was last year's order, with the duplicity and dishonesty which is characteristic of the Secretary of State. That is why we shall vote against it.

Mr. Allan Stewart: The right hon. Member for Glasgow, Craigton (Mr. Millan) complained about the timing of the debate. His memory seems to be rather short and I remind him that the 1977–78 order was considered on 22 December 1976 at 11.40 pm and the rate support grant orders for England, Scotland and Wales for 1979–80 were put together after a four-hour debate on a Thursday night—14 December 1978. The first speech on the Scottish rate support grant order was by the hon. Member for Glasgow, Maryhill (Mr. Craigen), who began at eight minutes past midnight on the Friday morning. So let us knock that piece of hypocrisy on the head.
We have heard a predictable speech by the right hon. Member for Craigton. He said that cuts were impossible without cutting services, and so on.

Mr. Harry Ewing: What about the new clause to the Local Government Bill?

Mr. Stewart: I will tell the hon. Gentleman about the new clause to the Bill whenever he wants a discussion on it, but it is not relevant to this debate.
The right hon. Member for Craigton and I have one thing in common—we live in the same area of Glasgow, in Dumbreck. A few streets away from my modest semidetached and the right hon. Gentleman's luxury flat lives the Lord Provost of Glasgow. I am sure that the right hon. Gentleman will agree that Dumbreck and Pollokshields are an attractive area in which to live. It is quiet, it is desirable, it is near the city centre, with many nice respectable people, most of whom vote Tory. It has one disadvantage—it is very difficult to get one's Sunday newspapers delivered. The House will hope that that is not too much of a nuisance for the right hon. Gentleman. It is certainly not too much of a nuisance for me. And it is no nuisance at all for the Lord Provost of Glasgow, because he has his newspaper delivered by the council chauffeur. I will start believing all this stuff and nonsense about a financial crisis in Scottish local government when the Lord Provost of Glasgow has to get his own Sunday paper.—[Interruption.]

Mr. Deputy Speaker: Order. The hon. Gentleman must realise that sedentary observations are not permitted. This debate must finish at 11·44 and the more time that is taken up by noise, the less we shall have for debate.

Mr. Stewart: Thank you, Sir.
I turn now to the comrades of Renfrew district council. It seems that they have trouble with their Sunday newspapers as well, but they are adopting a different solution. They propose a scheme under which they personally get cheap loans at the expense of the ratepayers to buy motor cars. That is outrageous, and I ask my right hon. Friend whether it is legal.
On more general points, my right hon. Friend has already mentioned manpower. Scottish local authorities have increased their manpower by 2,000 in one year,


whereas English local authorities have cut theirs by 35,000 or 40,000. This is not due to an increase in police manpower, as is sometimes said. The increases have been, for example, in social services. In the past year, Scottish local authorities have added 400 people in recreation and leisure. I have nothing against recreation and leisure: I like it myself. But one must ask what these people are doing. Why has employment in technical services increased by 20 per cent. over the past year? Why have direct works departments increased their employees by 200 in the last year?
The local authorities complain that the base for calculation is wrong. They say that the Government should not have continued with their original base, their estimates for 1981, but should have taken the local authorities' budgets instead. If local authorities had listened to Ministers when we came to power and responded properly and responsibly, they would not have the problems that they now claim they have.
The 6 per cent. figure that has been much criticised by the hon. Member for West Stirlingshire (Mr. Canavan) from a sedentary position—I do not wish to tempt him to rise—is entirely reasonable. Given the difficulties faced by the private sector, many people working in it will settle for less than 4 ½to 6 per cent. in the forthcoming year. In the light of national economic circumstances—

Mr. Norman Hogg: rose—

Mr. Stewart: I have to listen to the hon. Member for Dunbartonshire, East (Mr. Hogg) every Tuesday and Thursday morning. I shall forgo the pleasure of allowing him to intervene now. The settlement is reasonable and fair. The sacrifices, such as they are, are not the maximum possible, but the minimum necessary, if local government in Scotland is to make a reasonable contribution to the national recovery that we all wish to see.

Mr. Donald Stewart: I am glad of the opportunity to make a short contribution. I do not think that the Secretary of State will regard any Opposition Member who is not called as consenting through his silence. The first part of the speech of the hon. Member for Renfrewshire, East (Mr. Stewart)—it later became a serious contribution—made me worry whether I should stand up in case Hansard attributed the speech to the wrong Stewart when reporting the debate.
The net result of the order is that Scottish local authorities will be faced with incredible difficulties in trying to maintain services—including housing—and far more so in being able to improve them. It is all very well for the Secretary of State to talk about not cutting essential services. There is no way round that. Authorities will be obliged to do so, and in many cases the services will fall back severely.

Mr. Alex Pollock: I know that the right hon. Gentleman wishes to put the whole picture before the House. Is he aware that Grampian region's social committee last week voted to increase the home help service and certain other aspects of social care by £231,600?

Mr. Stewart: I am prepared to accept that. Grampian region is in a more fortunate position than many other parts of the country. If the hon. Gentleman wishes, I can give the other side—criticism of the Scottish office and the

Government—but that would be unfair to other hon. Members who are waiting to speak. I am keeping my speech as brief as possible.
However, the Government may try to disguise it, the net effect of tonight's orders, in conjunction with the Local Government (Miscellaneous Provisions) (Scotland) Bill, is seriously to weaken the concept of local autonomy. the Government are imposing their ideas and their determination of rents on local authorities. It is traditional for the Conservative Party to have scant regard for the idea of local determination. Not only did it set its face against any devolution of power to Scotland; it forced on Scotland the so-called reform of local government that removed its very definition. By the imposition of local government reform, the Government foisted on Scotland one of the most disliked and resented constitutional changes ever. It does not become the Secretary of State to complain about increases in staff and workers. That was inevitable. No doubt, at the time the old myth about economies of scale was trotted out, but it was inevitable in that sort of reform.
Behind the orders lies the Tory resentment of the big-spending authorities such as Strathclyde and Lothian, which, the Government say, are determined to wreck the Tory economic strategy to reduce public spending. Leaving aside the fact that the present Administration have no mandate whatsoever from Scotland, it is despicable that their party political disputes should be used in such a way that the innocent Scottish public suffer even more. Scotland has suffered enough from the shortsightedness of all Westminster Adminstrations—and this Administration is no different from the rest. Unemployment has risen steadily both under this Government and under the Labour Government. The manufacturing base of the country is being destroyed. Society is being torn apart. These petty squabbles between Labour-controlled local authorities and the Conservative Scottish Office merely add injury to the injustice.
The orders, no matter what buckets of whitewash the Secretary of State may bring along to cover them, represent mean aggression against the Scottish people and they will be seen in that light.

Mr. Jim Craigen: I am glad to have been called a little earlier in this debate than I was on that last occasion. I was going to begin by congratulating the Government's business managers on their skill in introducing the order at this hour of the night, because it is immensely important. Indeed, the Secretary of State pointed out that it constituted 40 per cent. of the Scottish Office expenditure.
The awakening is coming, because people are beginning to realise the deterioration that is taking place in the quality and range of services provided by local authorities. It is all very well for Members of Parliament to snipe at local government, but Parliament passes laws which impose more and more responsibilities on local authorities.
Many local authorities now find increasing difficulty in undertaking their statutory duties. One example is the Government supported Concessionary Travel for Handicapped Persons (Scotland) Act 1980, introduced by my hon. Friend the Member for Dunbartonshire, West (Mr. Campbell) last Session. Strathclyde region found that it did not have enough money in its budget to implement that discretionary legislation. Such problems will increase.
If the Government are looking for quangos to axe, I suggest the Stodart Committee which is supposedly looking into the inter-relationships of local government. I foresee experienced councillors getting fed up with the kind of role that is being assigned to local government. Whereas it has traditionally been accepted that local authorities act as the agents of the Government, the Secretary of State now expects them to act as the instruments of the Government.
Local authorities cannot be held responsible for the mismanagement of the Government's economic policies. A considerable conflict will develop between local and central Government democracy. We cannot expect elected local authorities to pursue the kind of economic policies that the Government are seeking to force on them.
The message is clear. The Secretary of State, in his press release announcing the rate support grant order, indicated that he expected local authorities to sack staff. Is he going to introduce a new element into the rate support grant whereby local authorities will be reimbursed for part of the cost of sacking staff? Redundancy involves heafty initial costs.
Conservative Members often complain about staffing levels in local authorities. I wish that they would show more concern about the unemployment level in Scotland. We are debating a rate support grant order involving £1·5 billion. Does the Secretary of State realise that the cost of keeping a quarter of a million Scots out of work for a year equals £1·5 billion? This loss in taxation, rent and rates and the need to pay out unemployment and supplementary benefits is equivalent to the Government funding of Scottish local authorities. The busiest offices will be those which deal with rent and rate rebates. I wonder how many extra staff local authorities will have to take on to meet savage increases in rents and rates in Scotland. Rent and rate arrears will increase considerably.
About 70 per cent. of local authority expenditure is on wages and salaries. The Government lay down guidelines about the numbers of teachers, firemen and policemen that should be employed. Central Government might as well employ such people themselves. Then the Secretary of State would be directly responsible for his actions. He could not blame the local authorities.
Conservatives talk about freedom, especially when in Opposition. In government they centralise the powers available to the the Government over the local authorities. One could almost say that they seek to nationalise local authorities. The Gaullists in France could learn from this Government about centralisation. The Secretary of State might as well appoint his own prefects to the local authorities. He believes that the men from St. Andrew's House know best. For a decade in the 1960s we examined the need for reform in local government. For a decade in the 1970s we implemented the reform of local government structure and sought to translate it into action. Now we face a decade in the 1980s when the local authorities will go into decline, if not into eclipse, The message of the order is that the local authorities will be the scapegoats for the Government's economic mismanagement.

Mr. Bill Walker: The right hon. Member for Glasgow, Craigton (Mr. Millan) mentioned a bogus Government figure. We have listened

to suggestions about the wages and salaries of local government employees. It would be wise to remember that the bill must be paid by taxpayers and ratepayers and that the Government have no magic pot of gold. We ask local authorities to act sensibly.
I was delighted by the comments of my right hon. Friend the Secretary of State about Tayside. I am sure that when the guidelines materialise and action is taken Tayside can look forward to obtaining its proper reward for having behaved responsibly for many years. I look forward to its gaining benefit from the needs element.
I turn to the question of manning levels. That local authorities behave differently from industry in these difficult times causes anxiety. Between March 1979 and September 1980, there was an increase in the number of full-time equivalent architects and people employed in management and computer services which is dfficult to justify. What I find most interesting is that the cost of internal transport increased cubstantially. I imagine that this is because they now all require to have their papers delivered.
I also look to the fact that the cost of central services has risen substantially. Contrary to some comments—particularly those of the fisherman below the Gangway, the hon. Member for West Stirlingshire (Mr. Canavan), who spoke from a sedentary position about the effect on teaching of Government policies—between March 1979 and September 1980 there was an increase of 454 teachers. That hardly bears out the comments about savagely destroying services and the removal of services.
One of my own district authorities assures me that its rate increase will be just into double figures, possibly, whilst another of my district authorities is talking about a three-figure increase. That shows the difference between authorities that behave prudently, sensibly and wisely in the interests of all those who live in their areas and the authorities with spendthrift policies.

Mr. George Foulkes: rose—

Mr. William McKelvey: rose—

Mr. Walker: I shall not give way. I am following the example of the right hon. Member for Craigton, who was not prepared to give way to Conservative Members. The people of Scotland are not interested in bogus figures or rhetoric. [Interruption.]

Mr. Deputy Speaker: Order. I again remind the House that the debate ends at 11.44 pm. If time is taken up with noise, we shall not get one more speaker in.

Mr. Walker: The people of Perth and Kinross are delighted to live there. My constituents who live in Longforgan and Invergowrie are not at all happy, because they know that Dundee district council does not behave responsibly. Consequently, they will largely foot the bill of that spendthrift authority.
In conclusion, I remind the House that much of the cost borne by the local authorities was to pick up the Clegg post-dated cheques left by the outgoing Administration.

Mr. George Foulkes: It is appropriate that I follow the hon. Member for Perth and East Perthshire (Mr. Walker), because earlier this week I had the opportunity to read the Daily Record, which reported that the Tayside regional council—not a Labour-controlled authority, but an authority controlled by the


Conservative Party—had said that the Conservative Government were mean and despicable. When that comes from a Tory-controlled authority, the Labour-controlled authorities can find no better words with which to express their feelings. That council finds that the rate support grant that the Government are giving to all the regional councils is such that it will presently find it difficult to carry out its statutory responsibilities.
I said on a previous occasion, and I say again with great seriousness, that all the regional councils, given the money that they will receive from the central Government, given the amount that they can raise through the rates, will find it difficult to carry out their statutory responsibilities. Some regional councils will be unable to provide the number of home helps that they consider necessary to deal with the elderly, and expectant mothers, and to carry out all the range of responsibilities imposed on them by legislation introduced by the Conservative Government.

Mr. Michael Ancram: Under what statute is there a requirement for a number of Labour councillors from Lothian region to go to Denmark on a beanfeast?

Mr. Foulkes: There are a number of statutes under which Governments of all complexions have placed responsibilies upon local authorities, involving expenditure upon such things as visits to other countries. Such sums are minuscule in comparison with the amount of money needed to provide vital services.

Mr. John Home Robertson: Since this is the International Year of Disabled People would my hon. Friend care to reflect upon whether it will be possible for local authorities to carry out their obligations under the Chronically Sick and Disabled Persons Act on the basis of this rate support grant allocation?

Mr. Foulkes: I am glad my hon. Friend raised that point because the disabled persons I have spoken to, including those in wheelchairs, find it sickening that the Secretary of State for Scotland is able to launch the International Year of Disabled People in Scotland. It is hypocrisy on his part, when the Government are making things more difficult for disabled people and making it harder for local authorities to provide services for them by way of capital building programmes. It is despicable of the right hon. Gentleman to behave in this way, so that he is able to receive approval and approbation for his alleged sympathy with the disabled while refusing to allow programmes aimed at helping the disabled put forward in good faith by, for example, Lothian regional council.
The disabled are beginning to realise how hypocritical the right hon Gentleman is. I had the unfortunate experience of attending the last annual general meeting of the Disablement Income Group when the Secretary of State spoke. The meeting was held in Ayr and the right hon. Gentleman was received in respectful silence. The people there knew that what he was saying was absolutely untrue. He was saying that the Government were sympathetic and understanding towards the disabled. Those at that meeting who were disabled knew that that was untrue. But they did not boo or hiss or shout, because they are understanding people. They did not boo and hiss—

The Under-Secretary of State for Scotland (Mr. Alexander Fletcher): Unlike the hon. Gentleman.

Mr. Foulkes: The hon. Gentleman is right. The Secretary of State was condemned much more by the silence of these people than anything I could have said. It is clear, in the International Year of Disabled People, that the Government are unsympathetic towards the disabled. It is clear that the rate support grant will make it increasingly impossible for local authorities to provide for them. That is one more reason why we should vote against the order.

Mr. Younger: By leave of the House, I shall reply to some of the points that have been made during the debate. The hon. Member for South Ayshire (Mr. Foulkes) may not have had time to read the report properly. He will notice, if he reads it later, that there is a 1 per cent. increase allowed for in guidelines on the social work side. No doubt that is something that can be used to help disabled people and I hope that it will be. I look forward to meeting the hon. Gentleman as often as I can at these functions because, like him, I have a great interest in the disabled, and always have had. There has been a galaxy of speeches. The right hon. Member for Glasgow, Craigton (Mr. Millan) did his best to make a speech and the hon. Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) has made a speech from a sedentary position throughout the debate, as has the hon. Member for West Stirlingshire (Mr. Canavan). I do not know what it is about Stirling that causes that to happen, but we greatly enjoyed all their contributions.
The right hon. Gentleman's contribution did not hold water on any of his main arguments. He was shot down in flames by my hon. Friend the Member for Renfrewshire, East (Mr. Stewart). The right hon. Gentleman's complaint that the debate began at the wrong time of day was absurd. On every occasion that the debate took place during his tenure of office it began at a similar time, and on one occasion the starting time was considerably worse.
Secondly, we were supposed to believe from the right hon. Gentleman and other Opposition Members that it is awful that the Government should be telling local authorities not to spend so much. They suggested that it was a dreadful Tory plot and something which should never be done by any Government and which could be done only by a wicked Tory Government. I remember the right hon. Gentleman's speech in December 1976 during the debate on the Rate Support Grant Order (Scotland) for that year. He said:
For example, the February 1976 White Paper on public expenditure stated that the substantial rate of expansion in recent years in local authority manpower and in local spending could not continue and that any increases in individual services had to be offset by reduced levels of provision in other services."—[Official Report, 22 December 1976; Vol. 923, c. 850.]
The right hon. Gentleman is now telling us that it is a scandal and a disgrace that the Government are telling authorities to reduce their spending. That is humbug and the right hon. Gentleman knows it.
The right hon. Gentleman produced a great farrago of indignation about the theory that local authority manpower is being unfairly treated because central Government manpower in Scotland has increased, which it has not. He is totally incorrect. Central Government manpower in Scotland has decreased irrespective of whether the State


hospital and the prisons are included. It has decreased considerably and the right hon. Gentleman should know that.
Finally, the right hon. Gentleman gave us a great spiel about cash limits. He described their dreadful effect and the squeeze that authorities suffer. He said that authorities had to reduce spending because of cash limits. Who invented cash limits? Who was the first Minister to produce cash limits on local authorities in Scotland? It was the right hon. Gentleman.
There was never during his time as Secretary of State any occasion when cash limits turned out to be sufficient for the expenditure that actually took place. On every occasion that the right hon. Gentleman produced a cash limit it did not produce enough cash to recompense local authorities for their actual expenditure. He knows that and I know that. He also knows that he introduced cash limits in the first place. It is nonsense to suggest that cash limits are new or that they should not be produced. He knows that they were introduced by his Government and that they are an indispensible part of keeping local authority expenditure within some limits.

Mr. Millan: What the right hon. Gentleman has said about the previous Labour Government is completely untrue. Will he tell the House what the rate increases next year will be?

Mr. Younger: I was about to turn to rate increase. The right hon. Gentleman spent a long time talking about rate increases. He said specifically and categorically, as did some others, that such increases are solely the responsibility of the Government. He did not address himself on this occasion, although he did at length in December 1976, to the effect of expenditure. If there are excessive rate increases—I am glad that many of the good authorities are not going to introduce them—they are due to one factor and one only, namely, irresponsible and excessive expenditure by local authorities that are not prepared to keep their spending under control. The right hon. Gentleman knows that. He said it himself on many occasions. Indeed, he preached that message to local authorities time and time again during his tenure of office.
If we are to have discussions on the rate support grant, let us at least agree that the system that we are operating—

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business):—

The House divided: Ayes 282, Noes 231.

Division No. 49]
[11.45 pm


AYES


Adley, Robert
Bendall, Vivian


Aitken, Jonathan
Bennett, Sir Frederic (T'bay)


Alexander, Richard
Benyon, Thomas (A'don)


Ancram, Michael
Benyon, W. (Buckingham)


Arnold, Tom
Bevan, David Gilroy


Atkins, Rt Hon H. (S'thorne)
Biggs-Davidson, John


Atkins, Robert (Preston N)
Blackburn, John


Atkinson, David (B'm'th, E)
Blaker, Peter


Baker, Kenneth (St. M'bone)
Body, Richard


Baker, Nicholas (N Dorset)
Bonsor, Sir Nicholas


Banks, Robert
Boscawen, Hon Robert


Beaumont-Dark, Anthony
Bottomley, Peter (W'wich W)


Bell, Sir Ronald
Bowden, Andrew



Boyson, Dr Rhodes



Braine, sir Bernard





Bright, Graham
Havers, Rt Hon Sir Michael


Brinton, Tim
Hawkins, Paul


Brittan, Leon
Hawksley, Warren


Brooke, Hon Peter
Hayhoe, Barney


Brotherton, Michael
Heddle, John


Brown, M. (BriggandScun)
Henderson, Barry


Browne, John (Winchester)
Heseltine, Rt Hon Michael


Bruce-Gardyne, John
Hicks, Robert


Bryan, Sir Paul
Hill, James


Buchanan-Smith, Hon Alick
Hogg, Hon Douglas (Gr'th'm)


Buck, Antony
Holland, Philip (Carlton)


Bulmer, Esmond
Hooson, Tom


Burden, Sir Frederick
Hordern, Peter


Butcher, John
Howell, Ralph (N Norfolk)


Carlisle, John (Luton West)
Hunt, David (Wirral)


Carlisle, Kenneth (Lincoln)
Hunt, John (Ravensbourne)


Carlisle, Rt Hon M. (R'c'n)
Hurd, Hon Douglas


Chalker, Mrs. Lynda
Jenkin, Rt Hon Patrick


Channon, Rt. Hon. Paul
Jessel, Toby


Chapman, Sydney
Johnson Smith, Geoffrey


Churchill, W. S.
Jopling, Rt Hon Michael


Clark, Hon A. (Plym'th, S'n)
Kaberry, Sir Donald


Clark, Sir W. (Croydon S)
Kellett-Bowman, Mrs Elaine


Clarke, Kenneth (Rushcliffe)
Kershaw, Anthony


Clegg, Sir Walter
King, Rt Hon Tom


Cockeram, Eric
Kitson, Sir Timothy


Colvin, Michael
Knight, Mrs Jill


Cope, John
Knox, David


Corrie, John
Lamont, Norman


Costain, Sir Albert
Lang, Ian


Cranborne, Viscount
Langford-Holt, Sir John


Critchley, Julian
Latham, Michael


Crouch, David
Lawson, Nigel


Dean, Paul (North Somerset)
Lee, John


Dickens, Geoffrey
Lennox-Boyd, Hon Mark


Dorrell, Stephen
Lester Jim (Beeston)


Dover, Denshore
Lewis, Kenneth (Rutland)


Dunn, Robert (Dartford)
Lloyd, Ian (Havant &amp; W'loo)


Durant, Tony
Lloyd, Peter (Fareham)


Dykes, Hugh
Luce, Richard


Edwards, Rt Hon N. (P'broke)
Lyell, Nicholas


Eggar, Tim
McCrindle, Robert


Elliott, Sir William
Macfarlane, Neil


Emery, Peter
MacGregor, John


Eyre, Reginald
Mackay, John (Argyll)


Fairgrieve, Russell
Macmillan, Rt Hon M.


Faith, Mrs Sheila
McNair-Wilson, M. (N'bury)


Farr, John
McNair-Wilson, P. (New F'st)


Fell, Anthony
McQuarrie, Albert


Fenner, Mrs Peggy
Madel, David


Finsberg, Geoffrey
Major, John


Fisher, Sir Nigel
Marland, Paul


Fletcher, A. (Ed'nb'gh N)
Marlow, Tony


Fletcher-Cooke, Charles
Mates, Michael


Fowler, Rt Hon Norman
Mather, Carol


Fox, Marcus
Maude, Rt Hon Angus


Fraser, Peter (South Angus)
Mawby, Ray


Fry, Peter
Mawhinney, Dr Brian


Galbraith, Hon T. G. D.
Maxwell-Hyslop, Robin


Gardiner, George (Reigate)
Meyer, Sir Anthony


Gardner, Edward (S Fylde)
Miller, Hal (B'grove)


Garel-Jones, Tristan
Mills, Iain (Meriden)


Gilmour, Rt Hon Sir Ian
Mills, Peter (West Devon)


Glyn, Dr Alan
Miscampbell, Norman


Goodhart, Philip
Mitchell, David (Basingstoke)


Goodlad, Alastair
Moate, Roger


Gow, Ian
Monro, Hector


Gray, Hamish
Montgomery, Fergus


Greenway, Harry
Moore, John


Grieve, Percy
Morris, M. (N'hampton S)


Griffiths, E. (B'y St. Edm'ds)
Morrison, Hon C. (Devizes)


Griffiths, Peter Portsm'th N)
Mudd, David


Grist, Ian
Murphy, Christopher


Grylls, Michael
Myles, David


Gummer, John Selwyn
Needham, Richard


Hamilton, Hon A.
Needham, Richard


Hamilton, Michael (Salisbury)
Nelson, Anthony


Hampson, Dr Keith
Neubert, Michael


Hannam, John
Newton, Tony


Haselhurst, Alan
Nott, Rt Hon John






Onslow, Cranley
Squire, Robin


Oppenheim, Rt Hon Mrs S.
Stanbrook, Ivor


Osborn, John
Stanley, John


Page, John (Harrow, West)
Steen, Anthony


Page, Rt Hon Sir G. (Crosby)
Stevens, Martin


Page, Richard (SW Herts)
Stewart, Ian (Hitchin)


Parris, Matthew
Stewart, A. (E Renfrewshire)


Patten, Christopher (Bath)
Stokes, John


Patten, John (Oxford)
Stradling Thomas, J.


Pattie, Geoffrey
Taylor, Teddy (S'end E)


Pawsey, James
Temple-Morris, Peter


Pink, R. Bonner
Thatcher, Rt Hon Mrs M.


Pollock, Alexander
Thomas, Rt Hon Peter


Porter, Barry
Thompson, Donald


Prentice, Rt Hon Reg
Thorne, Neil (Ilford South)


Price, Sir David (Eastleigh)
Thornton, Malcolm


Prior, Rt Hon James
Townend, John (Bridlington)


Proctor, K. Harvey
Townsend, Cyril D, (B'heath)


Pym, Rt Hon Francis
Trippier, David


Raison, Timothy
Trotter, Neville


Rathbone, Tim
van Straubenzee, W. R.


Rees, Peter (Dover and Deal)
Vaughan, Dr Gerard


Rees-Davies, W. R.
Viggers, Peter


Renton, Tim
Waddington, David


Rhodes James, Robert
Wakeham, John


Rhys Williams, Sir Brandon
Waldegrave, Hon William


Ridsdale, Julian
Walker, Rt Hon P. (W'cester)


Rifkind, Malcolm
Walker, B. (Perth)


Roberts, M. (Cardiff NW)
Waller, Gary


Roberts, Wyn (Conway)
Ward, John


Rossi, Hugh
Warren, Kenneth


Rost, Peter
Watson, John


Royle, Sir Anthony
Wells, John (Maidstone)


Sainsbury, Hon Timothy
Wells, Bowen


Scott, Nicholas
Wheeler, John


Shaw, Giles (Pudsey)
Whitney, Raymond


Shaw, Michael (Scarborough)
Wickenden, Keith


Shelton, William (Streatham)
Wiggin, Jerry


Shepherd, Colin (Hereford)
Wilkinson, John


Shersby, Michael
Williams, D. (Montgomery)


Silvester, Fred
Winterton, Nicholas


Sims, Roger
Wolfson, Mark


Skeet, T. H. H.
Young, Sir George (Acton)


Smith, Dudley
Younger, Rt Hon George


Spence, John
Tellers for the Ayes:


Spicer, Jim (West Dorset)
Mr. Spencer Le Marchant


Spicer, Michael (S Worcs)
and Mr. Anthony Berry.


Sproat, Ian





NOES


Abse, Leo
Cohen, Stanley


Adams, Allen
Coleman, Donald


Allaun, Frank
Conlan, Bernard


Alton, David
Cook, Robin F.


Anderson, Donald
Cowans, Harry


Archer, Rt Hon Peter
Craigen, J. M.


Armstrong, Rt Hon Ernest
Crowther, J. S.


Atkinson, N. (H'gey,)
Cryer, Bob


Barnett, Guy (Greenwich)
Cunliffe, Lawrence


Barnett, Rt Hon Joel (H'wd)
Cunningham, G. (Islington S)


Beith, A. J.
Cunningham, Dr J. (W'h'n)


Bennett, Andrew (St'kp'tN)
Dalyell, Tam


Bidwell, Sydney
Davies, Rt Hon Denzil (L'Ili)


Booth, Rt Hon Albert
Davies, Ifor (Gower)


Boothroyd, Miss Betty
Davis, Clinton (Hackney C)


Bradley, Tom
Davis, T. (B'ham, Stechf'd)


Bray, Dr Jeremy
Deakins, Eric


Brown, Hugh D. (Provan)
Dewar, Donald


Brown, Ron (E'burgh, Leith)
Dixon, Donald


Brown, Ronald W. (H'ckn'y S)
Dobson, Frank


Buchan, Norman
Dormand, Jack


Callaghan, Jim (Midd't'n &amp; P)
Douglas, Dick


Campbell, Ian
Douglas-Mann, Bruce


Canavan, Dennis
Dubs, Alfred


Cant, R. B.
Dunnett, Jack


Carmichael, Neil
Dunwoody, Hon Mrs G.


Carter-Jones, Lewis
Eadie, Alex


Cartwright, John
Eastham, Ken


Clark, Dr David (S Shields)
Ellis, R. (NE D'bysh're)


Cocks, Rt Hon M. (B'stol S)
Ellis, Tom (Wrexham)





English, Michael
Mason, Rt Hon Roy


Ennals, Rt Hon David
Maxton, John


Evans, Ioan (Aberdare)
Meacher, Michael


Evans, John (Newton)
Mikardo, Ian


Ewing, Harry
Millan, At Hon Bruce


Faulds, Andrew
Miller, Dr M. S. (E Kilbride)


Field, Frank
Mitchell, Austin (Grimsby)


Flannery, Martin
Morris, Rt Hon A. (W'shawe)


Fletcher, Ted (Darlington)
Morris, Rt Hon C. (O'shaw)


Ford, Ben
Morris, Rt Hon J. (Aberavon)


Forrester, John
Morton, George


Foster, Derek
Moyle, Rt Hon Roland


Foulkes, George
Mulley, Rt Hon Frederick


Fraser, J. (Lamb'th, N'w'd)
Newens, Stanley


Freeson, Rt Hon Reginald
Oakes, Rt Hon Gordon


Garrett, John (Norwich S)
Ogden, Eric


Garrett, W. E. (Wallsend)
O'Halloran, Michael


George, Bruce
O'Neill, Martin


Gilbert, Rt Hon Dr John
Orme, Rt Hon Stanley


Gourlay, Harry
Palmer, Arthur


Graham, Ted
Park, George


Grant, George (Morpeth)
Parker, John


Grant, John (Islington C)
Parry, Robert


Hamilton, James (Bothwell)
Pavitt, Laurie


Hamilton, W. W. (C'tral Fife)
Penhaligon, David


Hardy, Peter
Powell, Raymond (Ogmore)


Harrison, Rt Hon Walter
Prescott, John


Hart, Rt Hon Dame Judith
Price, C. (Lewisham W)


Hattersley, Rt Hon Roy
Race, Reg


Haynes, Frank
Radice, Giles


Healey, Rt Hon Denis
Rees, Rt Hon M (Leeds S)


Heffer, Eric S.
Richardson, Jo


Hogg, N. (E Dunb't'nshire)
Roberts, Allan (Bootle)


Holland, S. (L'b'th, Vauxh'll)
Roberts, Ernest (Hackney N)


Home Robertson, John
Roberts, Gwilym (Cannock)


Homewood, William
Robertson, George


Hooley, Frank
Robinson, G. (Coventry NW)


Horam, John
Rooker, J. W.


Howell, Rt Hon D.
Roper, John


Howells, Geraint
Ross, Ernest (Dundee West)


Huckfield, Les
Ross, Stephen (Isle of Wight)


Hudson Davies, Gwilym E.
Rowlands, Ted


Hughes, Mark (Durham)
Sandelson, Neville


Hughes, Robert (Aberdeen N)
Sever, John


Hughes, Roy (Newport)
Sheerman, Barry


Jay, Rt Hon Douglas
Sheldon, Rt Hon R.


John, Brynmor
Shore, Rt Hon Peter


Johnson, James (Hull West)
Silkin, Rt Hon J. (Deptford)


Johnston, Russell (Inverness)
Silkin, Rt Hon S. C. (Dulwich)


Jones, Rt Hon Alec (Rh'dda)
Silverman, Julius


Jones, Barry (East Flint)
Skinner, Dennis


Jones, Dan (Burnley)
Smith, Rt Hon J. (N Lanark)


Kaufman, Rt Hon Gerald
Snape, Peter


Kerr, Russell
Soley, Clive


Kilroy-Silk, Robert
Spearing, Nigel


Lambie, David
Spriggs, Leslie


Lamborn, Harry
Stallard, A. W.


Lamond, James
Steel, Rt Hon David


Leadbitter, Ted
Stewart, Rt Hon D. (W Isles)


Leighton, Ronald
Stoddart, David


Lewis, Arthur (N'ham NW)
Stott, Roger


Lewis, Ron (Carlisle)
Strang, Gavin


Litherland, Robert
Straw, Jack


Lofthouse, Geoffrey
Summerskill, Hon Dr Shirley


Mabon, Rt Hon Dr J. Dickson
Taylor, Mrs Ann (Bolton W)


McDonald, Dr Oonagh
Thomas, Jeffrey (Abertillery)


McElhone, Frank
Thomas, Mike (Newcastle E)


McGuire, Michael (Ince)
Thomas, Dr R. (Carmarthen)


McKay, Allen (Penistone)
Thorne, Stan (Preston South)


McKelvey, William
Tilley, John


Maclennan, Robert
Torney, Tom


McNally, Thomas
Urwin, Rt Hon Tom


McNamara, Kevin
Varley, Rt Hon Eric G.


McTaggart, Robert
Wainwright, E. (Dearne V)


McWilliam, John
Walker, Rt Hon H. (D'caster)


Magee, Bryan
Watkins, David


Marks, Kenneth
Welsh, Michael


Marshall, Dr Edmund (Goole)
White, Frank R.


Marshall, Jim (Leicester S)
White, J. (G'gow Pollok)


Martin, M (G'gow S'burn)
Whitehead, Phillip






Whitlock, William
Woodall, Alec


Willey, Rt Hon Frederick
Woolmer, Kenneth


Williams. Rt Hon A. (S'sea W)
Wrigglesworth, Ian


Wilson, Gordon (Dundee E)
Young, David (Bolton E)


Wilson, Rt Hon Sir H. (H'ton)
Tellers for the Noes:


Wilson, William (C'try SE)
Mr. Hugh McCartney and


Winnick, David
Mr. James Tinn.

Question accordingly agreed to.

Resolved,
That the Rate Support Grant (Scotland) Order 1980, a copy of which was laid before this House on 18 December, be approved.

Orders of the Day — Housing Support Grant (Scotland)

The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind): I beg to move,
That the draft Housing Support Grant (Scotland) Order 1981, which was laid before this House on 12 January, be approved.
It may be for the convenience of the House if I also speak at this time to the two variation orders.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Is that for the convenience of the House? The three orders will be taken together.

Mr. Rifkind: Before I say more about the orders, I should like to acknowledge the very helpful and constructive way in which the Convention of Scottish Local Authorities took part in the annual discussions that the convention has with the Secretary of State. While it is undoubtedly the case that there was disagreement on the expenditure and income implications of the grant, it is equally the case that in all other matters, including the very important distribution area, there was total accord between the Secretary of State and the convention, and we were happy to be able to accept a signficant number of requests and recommendations that the convention put to the Secretary of State.
I shall deal first with the second variation order for the year 1979–80. Hon. Members will recall that at about this time last year the House approved a substantial variation order for the 1979–80 settlement, to compensate for changes which had occurred in interest rates, costs and prices. The year being complete, it is now possible to consider whether a further variation order is justified to take account of increased expenditure almost entirely as a consequence of the level of interest rates. My right hon. Friend has considered this matter and, in accordance with the normal rules that are applied, has concluded that a further increase in grant of £14·7 million would be justified for the 1979–80 year.
I turn now to the variation order for 1980–81. In the light of the most recent information on the level of interest rates, remuneration, costs and prices, we have decided to increase the estimate of eligible expenditure, and hence the aggregate of housing support grants, by a total of £43·4 million. This is a very substantial sum, representing as it does about 23 per cent. over the main order, and it fulfils the pledge given by the Government tolocal authorities last January that authorities would not suffer from increases in expenditure as a result of changes in the general economy over which they had no control.
I turn to the main order for the year 1981–82 and I begin by dealing with the question of how the total housing support grant will be shared among local authorities. With

the full agreement of the Convention of Scottish Local Authorities, the order prescribes a method which is simpler and, I believe, fairer than that used for past years.
Hostels will continue to be supported fully in respect of their assessed operational deficits, and this will absorb £1·3 million. The rest of the grant will be distributed by a method in accordance with the factors shown in the schedule to the order. For the first time, the distribution of housing support grant is entirely unaffected by historic levels of subsidies under earlier systems. That has the support of the convention.
The most important item is loan charges. Grant distribution this year will proceed from an estimate of authorities' loan charges for 1980–81 rather than—as would have been the effect under the formula in previous years—by reference to the actual loan charges returned by authorities for 1979–80. This request was put to the Government by the convention last year. We promised to consider the matter. We have done so, and we have agreed to accede to the approach that the convention desired.
The rest of the expenditure side of the formula relates to management and maintenance expenditure. As in past years, this expenditure is expressed as a standard amount per house subject to weightings to meet the needs of authorities with high-rise housing stock and areas that are sparsely populated. In the first two years of housing support grant, the formula incorporated a special factor to protect the entitlements of authorities with small proportions of council houses per head of population. This arrangement has been dropped, with the agreement of the convention.
There is one aspect of distribution which is somewhat technical, but I must endeavour to explain it. The formula introduced by our predecessors in office provided for a distribution which was not directly proportional to the calculated local deficit. The result was that authorities with above-average expenditure were obliged to find more money out of their own resources. We followed this method last year, but discussions with the convention led us to conclude that the device operates harshly for some authorities, particularly those with active building programmes or high unit costs of building.
It was not an easy matter to decide, because a change in the distribution pattern means losers as well as gainers. But we decided that the device had outlived its usefulness, and it is accordingly being phased out. Hitherto, grant has been proportionate to 85 per cent. of net assessed expenditure. With the agreement of the convention, it will be 90 per cent. for 1981–82, and within two years thereafter distribution will be directly proportional.
I have said that formula changes bring gains and losses. So that the impact of losses should not be too severe, the formula includes a cushioning mechanism, which will ensure that no authority will suffer a loss of grant in excess of £145 per house compared with 1980–81.
The amounts of housing support grant to be received by authorities in 1981–82 are listed in annex C to the report. The sums have been calculated to the nearest thousand pounds but, before payment, will be calculated to the nearest pound.
I turn to eligible expenditure and income as regards the main order. Eligible expenditure has been estimated at £600·1 million, relevant income at £459·4 million and housing support garant—being the difference—has been set at £140·7 million. I shall explain how those estimates have been made.
On the expenditure side, loan charges account for just under 70 per cent. of the total. The estimates of capital expenditure included in this calculation accord with the government's public expenditure estimates. Authorities have, of course, been advised that their capital allocations for 1981–82 may be reduced if their levels of rateborne expenditure on the housing revenue account exceed planned limits. Nevertheless, the estimate of housing debt for 1981–82 reflects the full total of allocations which authorities may receive if they respond constructively to the Government's guidelines on rate fund contribution levels.
The other main area of current expenditure is on management and maintenance. In the current financial climate, we cannot afford to increase spending under these heads. Accordingly, the level of expenditure assumed for 1981–82 will he the level allowed for in the 1980–81 settlement, adjusted to take account of the increase in the housing stock and uprated by a factor of 9 per cent. This factor reflects the Government's view that local authority pay settlements next year should not on average exceed 6 per cent. As regards supervision and management, the factor incorporates a modest allowance in recognition of the extra costs which authorities may have to incur under the provisions of the Tenants' Rights, Etc. (Scotland) Act 1980.
Apart from Government subsidies, local authority revenue expenditure on housing is financed mainly out of rents and rates. Local authorities have been asked to hold their rate fund contribution to the housing revenue account in real terms at the figure which I recommended last year and to increase rents on average by about £2·33 per week, bringing the average Scottish rent to about £8·20 per house per week.
The rent increases reflect our judgment of what is reasonable. They would have been lower but for the failure of authorities generally to achieve the guideline rent increase figure for 1980–81, which was £1·40. Had authorities met this target, public expenditure targets for next year could have been met with rent increases of less than £2 per week.
I am well aware that some Opposition Members may not agree that £8 or so is a reasonable rent. I will give them a reasoned argument. First, the increases will not be borne by 25 per cent. of local authority tenants in Scotland who pay no rent and who will continue to pay no rent because of their low incomes. Secondly, there is a further 25 per cent. of local authority tenants who receive rent rebates. They will continue to be rebated. They will not pay a rent increase, on average, of more than £1 a week.

Mr. John Maxton: I am following the hon. Gentleman's argument, which I appreciate. All that the Minister is doing, surely, is to cut local authority expenditure and to put up public expenditure elsewhere. That seems totally against the concept of what he is trying to do.

Mr. Rifkind: If the hon. Gentleman was really following the argument, he would appreciate that the Government are protecting those on low incomes from rent increases that those with larger incomes can reasonably afford. The Government have emphasised that they have not the slightest desire to penalise people who would genuinely suffer hardship through unreasonable rent increases. Fifty per cent. of Scotland's council tenants will

not have to pay the average rent increase that is proposed. One-quarter will pay no increase at all. One-quarter will pay, on average, a rent increase of no more than £1 a week.
Half of the remaining 50 per cent. of Scotland's council tenants have a household income of more than £8,000 a year. It is not unreasonable to suggest that an average rent of £8 a week is a meaningful and responsible contribution to make towards housing costs. I do not think that any Opposition Member could seriously put an argument to the contrary.

Mr. Robin F. Cook: I am following the argument with care. Will the hon. Gentleman extend his argument to tax relief extended to owner-occupiers, who, on average, have a higher income than those to whom he has just referred? The tax relief for owner-occupiers has the same effect on public expenditure and the PSBR as a reduction in subsidy for which he makes his case.

Mr. Rifkind: The hon. Gentleman may not agree. I believe, however, that most reasonable people would draw a distinction between what one pays to the Government out of one's income and what one receives from other members of the public to subsidise one's expenditure. That is a reasonable distinction to draw. The hon. Gentleman should also appreciate that many owner-occupiers have, incomes of considerably less than £8,000 a year, which is the income of one-quarter of the households in public sector housing. It is wrong to suggest that council tenants are overwhelmingly the poorer members of the community and that those in the private sector are overwhelmingly wealthy. It is a meaningless comparison, as the hon. Gentleman knows.
If Opposition Members consider that the amount traditionally paid in Scotland for rent is at a reasonable level and that any increase can only bring about hardship, they might like to consider some comparisons. In 1979, the latest year for which we have figures, the average Scottish rent was £4·46 a week. In the same year, the average amount spent by a household per week on alcoholic drink was £4·73. On tobacco it was £3·61. I do not criticise anyone for the amount he spends on these items. I am sure that the hon. Member for West Stirlingshire (Mr. Canavan) would not wish to criticise people for the amount they spend on these items. It is an absurd proposition to suggest that while £4·70 on alcohol is a reasonable amount of expenditure, the sum of £4·46 spent on one's home is a gross imposition on the average member of the public.

Mr. Donald Dewar: Will the hon. Gentleman say whether he believes that it is an unfortunate financial necessity that rents have to rise or, as he now seems to argue, that he wants them to rise as an act of social justice?

Mr. Rifkind: No. If the hon. Gentleman has read the housing support order and the comments that have been made, he will be aware that the figure of rent increase proposed is the minimum figure that would be required to ensure that the rate fund contribution—that is, the contribution made by other members of the public—is maintained in real terms. That is the basis of the rent decision that has been reached, and it is on that basis alone that the figure is required. That is the figure that has been used.
But we are perfectly entitled to go on from that, when we are examining the figure of rent that will arise as a result of that calculation, if it is being suggested by Opposition Members that that is an unreasonable amount, and compare that sum with the sums traditionally used on what most people would consider to be luxuries, such as drink and tobacco. If we find that the sum spent on both of these items is almost identical to the sum traditionally spent on housing, I think that most reasonable people would conclude that that was a somewhat disproportionate situation.

Dr. M. S. Miller: The hon. Gentleman talks about averages, but when it suits him he picks out certain specific instances which are not averages; they are aberrations or anomalies in the situation. Secondly, the hon. Gentleman cannot specifically pick out housing as one item for which people have to find an increase. Added to all the other matters which the Government have piled on to people, this is an iniquitous increase which people ought not to have to bear.

Mr. Rifkind: The hon. Gentleman simply fails to understand the situation. If local authorities do not implement rent increases of that kind, they will be demanding an equivalant amount from the ratepayers. Some members of the public will be paying for these services. The question is whether the people who are receiving the services should make a slightly higher contribution towards the cost or whether an unreasonable burden should be put on the general ratepayers.
This is a short debate. I do not intend to detain the House any longer. I simply commend the order to the House on the basis that is fair to the tenant, to the ratepayer and to the responsible local authority. All those who come within those categories cannot, in any fairness or in any sense of an objective judgment on the matter, do other than recognise that the order is acceptable from any reasonable standpoint.

Mr. Deputy Speaker: I remind the House that we are also debating the two subsequent variation orders.

Mr. Donald Dewar: I always admire the practised ease with which the Under-Secretary works hard to mask the stark and unpalatable facts which lie behind his Government's policy. He has become very practised at denying what evidently is. We had a splendid example at the beginning of his speech when he said, almost casually, that perfect harmony had reigned between the Government and the Convention of Scottish Local Authorities; they had agreed on almost everything, except what was relevant income and what was eligible expenditure. If they could not agree on that—the foundations of the whole system—the hon. Gentleman's definition of "agreement" is very strange indeed.
I want fairly briefly to try to explain to the House why we regard this housing support grant as such thoroughly bad news for the whole of Scotland. The first reason is the very simple one that resources that are being made available to housing authorities in Scotland are being very sharply reduced in this support grant. It was £228 million last year. It is £140 million this year. That is a drop of 34 per cent. Putting it another way, the loss equals a reduction

in subsidy per house of about £100. That is a very substantial amount on every local authority house in Scotland. Indeed, in 11 authorities it is above £145 per house, although they have been stabilised at that quite scandalous figure at the expense of other authorities.
What we are saying, very simply, is that to decrease in this dramatic way the real resources that are available for housing need in Scotland, at a time when the housing crisis is deepening and when authorities are struggling to maintain properties and standards, is a criminal misuse of priorities by the present Government.
We are entitled to ask what the future holds, because the White Paper on public expenditure shows that housing expenditure will be reduced by 42 per cent. by 1984, and that this year it runs at £603 million and by 1984 it will be down to £410 million. That kind of drop would easily accommodate the virtual abolition of the housing support grant by 1984.
If that is what is happening, if that is the road which we are to be taken down right to the end, the consequences for housing in Scotland will be very serious. Perhaps we could hear something of this in the wind-up speech.
Our objection is that the whole housing support system is artificial and contrived. I suspect that we start with the result that the Minister has a figure in his mind and he slots in the figures which allow him artificially to arrive at the conclusion he wants. I cannot go into it but we all know—it was referred to in the last debate—the appalling artificiality of the 6 per cent. expectation on wages and 11 per cent. on general cost inflation. No one believes in those figures, which show just what a totally artificial system we are now trying to operate.
But apart from the cut in the HSG itself, to appreciate the full impact, one must also consider what the Government are doing on the rate fund contribution in the individual authorities. The aggregate for the rate fund contribution for the whole of Scotland, the Government suggest, is £62 million. Last year it was £88 million. If that were updated for inflation, it would be about £102 million or £103 million. So the £62 million is very low. It cannot be achieved and I do not believe that any hon. Member believes that it can be achieved. It is a determined disregard for reality by the Government and they put it forward for a reason which is good to them but sinister to us.
It is a superbly simple strategy. One cuts the housing support grant, because that is within the Government's control; then one restricts the rate fund contribution, and one has a yawning gap between those totals and the income needed to meet expenditure. One is then forced either to massive redundancies and cuts in services or to what I suspect the Government really want—massive increases in rents. That is achieved by shamelessly manipulating the artificial formula for designating the individual rate fund contributions of local authorities.
The Government have taken a straight population multiplier of £8. Let me illustrate the idiocy and artificiality of that approach. It means that areas with the same population get the same notional rate fund contribution. One example which has been used often in the debate is that of Eastwood and Clydebank. They are on a par because each has a population of just over 50,000. But Eastwood has 2,000 public sector houses and Clydebank has 11,000. The rate fund contribution, as a contribution or subsidy per house, comes to a figure of £308 in Eastwood and only £52 in Clydebank.
So the system at the end of the day militates strongly and shamelessly against authorities with big public sector housing inputs. That is a distortion which cannot be defended by any sane or reasonable person. If there is to be this kind of allocation of RFC, the formula should at least take some account of historic fact or of the housing needs of individual authorities.
This may sound very dry and academic, but the result is totally devastating. In my own local authority, Glasgow, last year the RFC was just over £27 million. This year, the Secretary of State has said, "It must be restricted to £9 million, and by the way we are docking £7½ million of your housing support grant as well". As a result, when Glasgow considers its expenditure and its reduced HSG and the ludicrous RFC, it finds a shortfall of £42 million, which has to be made up by increases in rents, if it is done as the Secretary of State implies, of almost 70 per cent.
Even if we take the Shelter figures that have been circulated to all hon. Members, which make a simpler calculation and leave out expenditure variations, and merely take the HSG plus the RFC for 1980–81 and subtract the similar figures for 1981–82, it is clear that there was a startling assumed rent increase in the mind of the Secretary of State when he fixed his figures.
It is not only the big, wicked Socialist authorities which are penalised. Caithness, Skye and Lochalsh, Nithsdale and similar authorities will be expected to find 50 per cent. increases if the figures are to be taken seriously, as the Secretary of State apparently intends. I listened with care to the Under-Secretary. He started by implying that the rent increases were unfortunate. He said that if we had held to certain financial targets in the previous year they would not have been necessary. I thought that he was bringing forward an argument of financial expediency—no one likes it, but it is necessary unpleasant medicine and for the good of the country we must swallow it. The cliches flow easily.
But the hon. Gentleman appeared to argue that rents in Scotland are too low when set against certain social criteria—we spend more on drink and tobacco and so on. The overwhelming impression left by the Under-Secretary—and we want to know whether it is a correct impression—is that he wants rents to go up because he feels that that is socially desirable. If that is the Government position, and I suspect that it is—not just because of what the Under-Secretary said, but because it is the logic of the fraudulent system that the Government are operating—the people of Scotland are entitled to know that.
The point made by my hon. Friend for Glasgow, Cathcart (Mr. Maxton) is valid. There will be some offsetting increases in other sectors of public expenditure. If the 50 per cent. or 55 per cent. of council tenants who are already eligible for rent rebates, though many may not take up their entitlement, is to be increased, the cost of the rebates will largely be borne by the Exchequer and there is bound to be an offsetting advantage.
The morality of the Government's saying that they want average rent increases in Scotland of 40 per cent. while the wage rises of those who will be paying the increases should be held down to about 6 per cent. is wrong. But not only is the morality wrong. The sanity and the political philosophy from a Tory point of view are wrong, because we shall be drawing thousands of families into the poverty trap with these ill-conceived measures.
All that is depressing enough, but there is a final refinement which I find the most objectionable feature of the housing scene. It is the Government's intention to link housing capital allowances to the level of rents. That is a monstrous proposition—I use those words advisedly—and essentially objectionable. People's expectations and perhaps their real needs will always outrun what we can supply in the short term, but at least there ought to be an equitable principle of distribution—which must be the need of the local authorities that are putting in bids for the available resources.
The Government have said that there is £267 million to be distributed in housing capital allowances this year, presumably according to need, and every local authority will be given its dollop. But the Government added that the £267 million may become £200 million, because they may dock up to £67 million, not because the needs disappear and not even because of financial necessity, but because authorities have not forced up rents artificially to the levels pre-determined by the Secretary of State.
Let us take Glasgow as an example. In its third housing plan, the council reckoned that its capital requirements for 1981–82 would be £79 million. It was allotted £66 million and I do not complain about that. The council probably did not expect to get everything that it asked for. Presumably the Scottish Development Department and the Minister thought that Glasgow ought to get £66 million on merit and on need. The council has now been told that that will be cut to £55 million—a drop of £11 million—unless it forces up its council house rents by at least 50 per cent., and that it will not receive the whole £66 million unless council house rents rise by something approaching 70 per cent. That is an offensive and monstrous sanction of the most crude and immoral sort. I do not want to give any encouragement to such a proposition. To break the concept of need in the housing capital allowance, and tie it artificially to an arbitrary rent policy—an unjust and inequitable policy to boot—is something that no Ministry worth its salt should contemplate.
On Monday evening the Minister drew my attention to an item on the Press Association tape, for which I was grateful. I thought it worth sharing with the House. It stated:
Britain could he heading for a disastrous housing shortage, a leading builder has warned…house building had dropped to the lowest level since 1053
I do not know in detail the housing policy that existed in 1053, but at that the equivalent of the Secretary of State was Macbeth. I do not think that he was noted for his housing management record. If I remember rightly he laid waste to the land with pillage and pestilence. I am considering tabling a parliamentary question to discover any other similarities between his housing record and that of the Government.
We are facing a desperate prospect. Rents and rates will soar, and at the same time the Government's prescription is "You will pay more, but you will receive less". We shall see new building grinding to a halt. We shall see rehabilitation and modernisation programmes and the building of sheltered and special purpose housing, almost disappearing. To be fair to the Minister, I am sure that he has the same problems in his constituency as I have in mine. It is difficult to talk sympathetically and hold out much hope to someone living in a house that was built long before the war, and who is genuinely worried not only about inadequate, but about positively dangerous wiring


when our message must be "Your rent and rates will rise massively, but the re-wiring work that you have been waiting for for so many years must be postponed indefinitely because of the capital allowance cuts introduced by the Minister". We have to say that the cash which our constituents had hoped for to modernise their homes has been filched by the Govenment as a sanction measure because their councillors have not been beastly enough to their tenants. That is a cock-eyed and ludicrous position for any councillor or housing Minister to be in.
We are facing a real crisis. I have been around in Western Scotland and involved in Scottish politics for a considerable number of years. For the first time I am now meeting responsible and reasonable councillors who are asking "What is the point of continuing? If we are to be tied, as a sort of mute, executive arm, to policies that we abhor and cannot influence, there is a limit to how far and how long we can go". I am trying to argue that we have not yet reached that stage. But when I look at this sort of housing support grant, and at clause 13 of the Local Government (Miscellaneous Provisions) (Scotland) Bill which is in Committee—it allows the Secretary of State to deem to be excessive and unreasonable any estimated expenditure of a local authority, on grounds so wide and ill-defined as to provide no significant check against prejudiced, arbitrary and insensitive administrations of the sort that I begin to fear we are now facing—I have some genuine sympathy with the worries and the anxieties of those councillors. It is a bad, bad thing for the whole of the local government system when such a mood of defeatism and resigned anger is abroad.
My local authority has been agonising over the apportionment of the massive increase beween rates and rents. In a sense, although it is theoretically important, for many of my constituents—and no doubt those of other hon. Members—in the outturn it does not really matter very much. Whether it is 31 per cent. on rents and 31 per cent. on rates, or 15 per cent. on rents and 47 on rates, if one lives in a three-apartment flat in my constituency at the end of the day the difference between the two is only a few pennies. Because of this housing support grant, no matter how ingenious the councillors, no matter how they may turn and twist, that family will have to find about £12 or £13 a month at a time of economic distress and high unemployment.
I say to the Minister in all seriousness—

Mr. Rifkind: Will the hon. Gentleman give way?

Mr. Dewar: I am just finishing—this is seriously flawed in principle and wretched in result. I hope that we shall all register our protest in the Lobby at the end of the debate.

Mr. John MacKay: The two variation orders basically reflect the changes in both outturn prices and interest charges over the past two years. These orders are a feature of the way that the central Government help to finance local authority housing, and I am sure that that will continue to be so.
This year's main order will be subject to variation orders if that proves justified in the light of inflation and interest rates during the year. I am sure that my hon.

Friend will be happy to give me and the Convention of Scottish Local Authorities an assurance that that will continue to be so, as it always has been.
I turn from those two orders to the order for this year. There is a relationship between the orders. The Government's 1980–81 calculations were based on average rents in Scottish local authorities of £6·25—an increase of £1·40 over the 1979–80 figure. However, rent increases were 95p per house. This shortfall has had to be made up by taking £21 million extra out of the rate fund contribution. The failure to raise the average by another 45p per week in the last financial year not only results in an added rate fund contribution—indeed, I suspect that in some cases it results in an even larger housing revenue account deficit—but distorts this year's figure.
It is not an artificial figure on which my hon. Friend is working. It is the actual figure, and it is in the order. It is the cost of local authority housing compounded by interest charges and maintenance, repairs and factoring fees. That is a real, not an artificial, figure that has to be covered. The formula as to how it is covered from rates, rents or central Government support may be artificial, but the total that has to be raised from those three sources is in no way artificial. It is realistic, it exists, and it has to be paid by somebody.
Because last year the local authorities did not put up rents as high as they were asked to put them up by the Government, this year's rents will have to be that much more on average. In fact, this year's rents will on average have to be £2·33 more than last year. If the local authorities had been responsible and realistic last year, the figure for this year would have needed to be only £1·92.
Listening to Labour Members, one would think that there had been no rent increases during the Labour Government's administration, that they took the view that rents should be frozen at some existing totally artificial level, that any new money that needed to be found for the housing revenue account could come from either ratepayers or taxpayers and that, frankly, rates could be kept at a constant level. That was not the situation under the Labour Government. They put up rents. If they had put them up a little more and put more into the housing revenue account by way of income, they might have been able to devote more to the expenditure side, thereby preventing many council houses from needing dramatic modernisation. If there had been a proper maintenance programme, perhaps we would not have so many council houses needing modernisation.

Mr. Cook: The hon. Gentleman may be willing to mislead himself, but I am sure that he does not want to mislead the House. Modernisation expenditure in the majority of housing authorities is met out of the capital allocation. But the Government are slashing the capital allocation to local authorities at the same time as they are cutting the subsidy on the housing revenue account. The hon. Gentleman cannot argue that there is a trade-off here. The Government are having it both ways.

Mr. MacKay: The hon. Member assumes that I am talking only about the current situation. I am talking historically. I accept that some of the present modernisation has to be of a capital nature, but I suggest that if a proper maintenance programme had operated over the years, using money in the housing revenue account,


not as many council houses would need drastic and expensive modernisation to make up for years of neglect, to window paintwork, for example.
The argument is not that a person who spends a certain amount on drink and tobacco should pay a comparable rent. The figures are not arrived at in that way. The housing revenue account and expenditure must be met. Levels of rent were suggested by the previous Government, as they are by this Government, to help cover the housing revenue account. The levels are said to be similar to the expenditure by the average household on drink or tobacco, but that is simply because an attempt has been made to put housing expenditure in context. To hear some hon. Members, one would think that a council house rent is so exorbitant that people cannot afford it. If that was so, the average expenditure on other items would not be at their present levels. If people can afford to spend that amount on drink and tobacco, it is reasonable to assume that they are prepared to spend as much, if not more, on providing housing for their families. Of course, people who cannot genuinely afford to pay the rent because of a variety of circumstances are protected by rent rebates and supplementary benefit. That is right.
I draw the Minister's attention to a major anomaly which gives rise to much argument between the Government and local authorities. The two sectors of housing are financed in different ways. The private sector is financed by the Chancellor of the Exchequer through taxation allowances and mortages. The public sector is helped by housing support grants. In addition, local authorities can take money from the rates in the form of the rate fund contribution and put that into the housing revenue account. Local contributions include both rent and rates. The 1979–80 figure is £301·5 million. How much of that was rent and how much rates? The Minister might like to examine the estimated figure for 1981–82. How much of that will be rent and how much rates? The Minister is realistic. He might like to hazard a guess at the reality, given the policies that some local authorities favour.
I believe that local authorities have an option which they should not have. I accept that the Government would have to pay more in housing support grant if they were the only source of help to the public sector, as they are the only source of help to the private sector. However, if local authorities did not have the option, the amazing position in Glasgow and elsewhere would be prevented. In every council there is an argument about whether rents or rates should be increased.
I accept that if rates are increased, people living in council houses have to pay a little as well. But they have to shoulder a good deal less if the rates are increased than the people who do not live in council houses but are in the private rented sector or paying mortgages, because such people shoulder part of the housing burden of others.
Even this week we have seen in the city of Glasgow the sort of fight that I am mentioning. The elected council leaders on the district council decided to go for a bit on both; they decided to put up both the rents and the rates, with a 31 per cent. increase in the rents. Along came another body, called the general management committee of the city of Glasgow Labour Party—not elected by anyone in the city, and not responsible to the electorate or anyone else—which told the elected councillors "You cannot do that. You will put only 15 per cent. on the rents." At a guess, that means 45 per cent. on the rates.
That is an example of the sort of gerrymandering that can go on because local authorities can take the option of loading some of their contribution on to the ratepayers, not the payers of rent. [Interruption.]
Before Labour hon. Members take leave of their senses too much—

Mr. Bill Walker: Too late.

Mr. MacKay: Far too late. I remind the Opposition that I said that the Government might well have to increase the rate support grant provided by the taxpayer, but at least we should get out of one part of this annual squabble if public sector housing were supported entirely by the Exchequer, in the same way as private sector housing bought on mortgages is, so that the ratepayer makes no contribution towards local authority housing.

Mr. Ernie Ross: The figures announced in the grants to Scottish councils, particularly in the housing support grant, are woefully inadequate. They reflect the views not of the Secretary of State or the Under-Secretary but of their master—or, rather, their mistress. in her obsessive attacks upon public expenditure.
As with many other Labour-controlled councils, Dundee district council is having its housing support grant cut by the Secretary of State, who is telling it to make up the deficit on its housing revenue account by an increase in rents or rates, or a combination of both. Whether a district council increases rents, rates or both, the blame for these increases lies firmly with the Tory Governent and not with the council. I hope that every Labour-controlled authority in Scotland will make that point perfectly clear to its electorate. Certainly, Dundee district council will.

Mr. Rifkind: The hon. Gentleman is suggesting that the Government are requiring Dundee to make an intolerable increase in its rents. Is he aware that, as a result of the very sensible policies of Dundee while it was under Conservative administration, the rent increase that it will be required to make now amounts to no more than 99p?

Mr. Ross: I am glad of that intervention, and I shall come to it a little later,
The message that I bring from the people of Dundee to the Tory Government in 1981 is that they will not allow them to turn Dundee into an industrial ghost town. With 13,000 people already unemployed, and with the city reeling from blow alter blow in an unemployment crisis without equal since the 1930s, what help does the Secretary of State offer Dundee? He slashes its district council's housing support grant by half and tells it to regain that money from the pockets of the people of Dundee. He is holding a gun to the district council's head and saying "If you do not cut your throat, I shall blow your head off."
The hon. Members for Perth and East Perthshire (Mr. Walker) and for South Angus (Mr. Fraser) have been busy spreading dark, wild tales about the evil doings of the wicked Labour-controlled Dundee district council, which will be doubling its rates next year. The culprits in their eyes, of course, and in the eyes of the hon. Member for Argyll (Mr. MacKay) are the Labour Party. However, if they have read the letter in the Dundee Courier and Advertiser from the council's non-political director of finance on 12 January, they will have discovered who the real villains are. The director of finance said:


as I explained in my annual report on the 1979–80 financial accounts, a fairly substantial increase in the district rate for 1981–82 is unavoidable because of the use of reserve balances to balance the current year's budget and to offset the amounts lost to the district council in government grants.
These factors alone could double the district rate without altering in any way the current year's level of expenditure or taking any account of the alleged rate of inflation."
I certainly hope that hon. Members will use these reasons when explaining to their consituents why it is necessary for the rates to be increased. The previous minority Tory administration of Dundee district council plundered £3½ million from the reserve balances in a desperate election gimmick to cut the rate to its present level of 14p in the pound. However, that gimmick failed and the Tory Party was incapable, despite that cut, of winning power in the city of Dundee. It managed to cobble together only a ragged minority administration, with the support of three Tory councillors from the constituencies of the hon. Members for South Angus and for Perth and East Perthshire.
To restore the reserve balances will require an increase in the rates of at least 7p in the pound. Thus, 50 per cent. of any rate increase in Dundee district is due entirely to the actions of Tory councillors. I am sure that Tory Members will take great delight in telling their constituents exactly who is responsible for at least half of any rate increase.
The other accomplices in all of this, hand in hand with the "dynamic duo", were the Tory Government, with their ruthless pruning of housing expenditure. If my colleagues on Dundee district council agree not to raise the rents, I shall certainly support them in the House and outside. At a time when the Prime Minister is demanding that workers settle for 6 per cent., when unemployment in Dundee is above the disastrous level in Scotland generally and when rents in Dundee are above the Scottish average, there is clearly a good case for freezing the rents in Dundee.
I am sure that the hon. Members for South Angus and for Perth and East Perthshire will drag out the ancient tales about the ratepayers featherbedding council house tenants. The Tory Party consistently forgets that council house tenants are ratepayers. I have some figures which I hope Government Members will take back to their constituents. The average contribution towards rates from rents collected by Scottish district councils is around £98 a year. In Dundee district council it is only £18 a year. There is a clear case for a more equitable contribution. It is a case which we shall certainly use to ensure that rents in Dundee are frozen, following a review of council rents. I emphasise that the increases that Dundee district council and other local authorities are forced to apply, in either rents or rates, are a result of the Government's policy
I come now to a point which will interest the hon. Members for Perth and East Perthshire and for South Angus. They have made their position clear over Dundee district council's rents and rates in the coming year, as I have. The same cannot be said of the hon. Member for Dundee, East (Mr. Wilson)—the silent man of Dundee politics. I am afraid that "the greatest member of Parliament Dundee has ever had", as he loves to hear himself described by the remains of his local party, still

cannot understand why he received such a humiliating vote of no confidence in the Dundee district council elections last year, along with the rest of his party.
The answer is simple. The hon. Gentleman voted with the Tories to bring down the Labour Government. After a little over one year of this Tory Government, whom he helped to bring into office, and after the awful consequences that that has had for Dundee, the working-class electorate in Dundee, East have given the hon. Member his just rewards. I am prepared to give way to the hon. Member so that he can make crystal clear his position over the support grants and how they affect Dundee. Does he favour a rent increase? Does he favour a rates increase? I realise that he is in some difficulty. He has at the back of his mind the thousands of Tory voters who supported him, and he cannot afford to offend them too much. Let the hon. Gentleman come clean on this issue without referring to oil, independence or any of the other tired language that he uses in his press releases. Let him tell us now whether he wants rent increases or rate increases.

Mr. Dennis Canavan: Will my hon. Friend remind the House and the hon. Member for Dundee, East (Mr. Wilson) that it was not a Tory council that took the initiative in the lifetime of this Parliament in implementing a 40 per cent. rent increase? The initiative was taken by the SNP-controlled council in Cumbernauld and Kilsyth, which covers part of my constituency. The Tories aided and abetted the SNP to increase rents by 40 per cent.

Mr. Ross: Even the comments of my hon. Friend fail to draw the hon. Member for Dundee, East to his feet, despite the fact that he is the chairman of the party to which my hon. Friend referred.
There have been many comments about what local authorities that behave themselves might do. I refer to a comment made by Ian Mackie, the leader of the Tory-controlled Tayside regional council. No one in Dundee is fooled by the squeaks of protest from Tayside Tories that they are not being given enough money to provide and run services in the region. They brought the situation upon themselves by persistent spending. They underspent by a massive £2½ million below the level that even Margaret-the-milk-snatcher Thatcher was prepared to give them last year.

Mr. Deputy Speaker (Mr. Bernard Weatherill): This has been a good natured debate. I understand that it follows a party earlier in the evening. We cannot have phrases of that sort.

Mr. Ross: I did not attend the party, Mr. Deputy Speaker. It is important to tell the House that the electorate in Dundee elected a Labour-controlled council to ensure that rents and rates would be kept to minimum levels within what it believed was necessary to ensure the provision of services to the people of Dundee. I am certain that when my colleagues on the local authority carry out the review, as is their responsibility, they will decide that rents in Dundee should not be increased this year. I shall support them if they come to that decision.

Mr. Peter Fraser: The hon. Member for Dundee, West (Mr. Ross) has referred to my hon. Friend the Member for Perth and East Perthshire (Mr.


Walker) and myself as the dynamic duo. He has kept me sitting on the edge of my seat wondering which of us he considers to be Batman and which of us is Robin.
As for the level of rates in Dundee, it will not need a 40 per cent. rule—this might attract the hon. Member for Dundee, East (Mr. Wilson)—to take Monifieth or Invergowrie out of Dundee district, in view of the way in which the Labour administration has acted, and to take them back into Angus and Perthshire.
If the hon. Gentleman is so concerned for the citizens of Dundee district council and if he feels that the financial burden that they will have to tolerate will be too great, he should urge the district council to tell my right hon. Friend the Secretary of State that he is to be relieved of the cost of imposing upon them a public inquiry to ascertain what they are to do about the sales of council houses. At the end of the day, the ratepayers will have to face the cost of litigation and the public inquiry if there is no change of attitude.
Those of us who have argued that the Government should constantly be asserting a distinction between revenue expenditure and capital expenditure might be expected to resist the approach that the Government have taken to link local authority housing expenditure on both the capital and revenue sides. I said on an earlier occasion, in our proceedings on the Local Government, Planning and Land Bill, that I sometimes have a sense of despair that we are not achieving that. But, having looked into the matter in relation to housing support grant at present, I have no doubt that my right hon. Friend and my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), who has responsibility in this context, have no opportunity to do anything other than make this regrettable link between the capital side and the revenue side of housing expenditure.
The reason is that, for the crudest of electoral reasons, with total disregard for the burden that both industry and commerce will have to pay in supporting housing in Scotland, any attempt to move council rents upwards will be resisted. If the hon. Member for Glasgow, Garscadden (Mr. Dewar), who is speaking for the Opposition Front Bench now on this aspect of local government, were to act with any constructive honesty, he would at least tell us what he would have done in his approach to the matter.
The hon. Gentleman told us in moving terms of a sum of about £12 per month as the expected increase which, as he put it, council tenants in his constituency would have to pay. The first small inaccuracy there is that, on average, only one in two of his council tenant constituents will be paying anything like that. But what he failed totally to tell us is what he would regard as anything like a reasonable increase in council rents.

Mr. Canavan: No more than 6 per cent.

Mr. Fraser: All the hon. Member for Garscadden did was to say that it is objectionable and leave it at that.
We know that earlier in the day representatives of the Labour Party met representatives of COSLA. While this matter of the link between the capital side of housing expenditure and the revenue side was discussed by them, what came out clearly to us was that it did not matter what my hon. Friend the Member for Pentlands did—any technique which he deployed in an attempt to persuade local authorities to move rents upwards would have been resisted as objectionable. That is, I suppose, what one

would expect, but I regret that the hon. Member for Garscadden has not addressed himself to this question. Although he regards as objectionable—even in a moral sense, he seemed to suggest—the technique which the Government have adopted over the link between the capital and revenue side, he has given no indication of the alternative technique that he suggests should be deployed. I listened carefully to the hon. Gentleman, and he made no proposals whatever for an alternative line.

Mr. Dewar: It is difficult for me in my position to pick a rent figure which I think reasonable, but as a general principle I believe that it is not wrong to suggest that rents should keep pace with earnings but should not eat into people's living standards by exceeding the average earnings level.
On the other point, I think that it is a perfectly reasonable proposition, which was clearly expressed in my speech, that housing capital allowances should be decided upon need and only upon need. On that I would stand.

Mr. Fraser: I am afraid that the hon. Gentleman is still not taking the point that I am putting to him. It is not about the extent to which there is an appropriate level. We could argue about that, and possibly disagree, all night. What he has failed to present is what technique ought to be deployed to achieve an increase of any sort whatever. Frankly, that is a regrettable omission.
I come finally to a technical point on which I hope to be given some illumination by my hon. Friend. As I understand the order, it proceeds upon a number of assumptions, and one of the assumptions in the calculation is a figure of about £55 per house included for 1981–82 in respect of supervision and management alone. I understand that the figure per house allowed for repairs and maintenance so £160. Can my hon. Friend comment on the £55 per house to be allowed in 1981–82? It seems to me to be an extraordinarily large amount. If we are now moving into an era in which, we are told, there are tremendously improved techniques of management in local government, that figure should not be increasing year by year, as it appears to be from the information that I have. If the techniques of rent collection and so on are improving, far from increasing year by year, the figure should be decreasing. I hope that the Under-Secretary of State will be able to provide some information on that.

1 am

Mr. Dennis Canavan: I wish to confine my remarks to the Housing Support Grant (Scotland) Order 1981. It is a recipe for increased rents, a reduction in housing standards and a reduction in the living standards of the thousands of council house tenants throughout Scotland, which many hon. Members—supposedly on both sides of the House—represent.
In the financial year 1981–82, the Government propose a cut in the housing support grant amounting to £72·5 million. Compared with last year, that is a reduction of 34 per cent. Combined with the alteration in the rate fund contribution and the Government issuing new guidelines on the rate fund contribution that represents a cut of £39·2 million, or about 39 per cent., compared with last year's arrangements for the rate fund contribution.
The Government seem to expect an average rent increase of £2·33, or 40 per cent. Many local authorities


will face extreme pressures from the Government to increase rents by even more than 40 per cent. If they are to meet the Government guidelines, 17 of the councils in Scotland will have to increase rents by over 50 per cent. and eight will have to increase rents by over 60 per cent. I do not know whether I am unique—[HON. MEMBERS: "Yes."]—but I have within my constituency six different housing authorities, including the Scottich Special Housing Association. I say that there are six, but there is also the Milngavie and Bearsden district council but it does not have any council houses in my constituency that I know of, so I shall stick to the four district councils.
The rent increase assumptions used by the Government in their calculation of the rate fund contribution guidelines and the housing support grant reductions amount to an increase in Falkirk of 54 per cent., in Stirling an increase of 54 per cent; in Cumbernauld and Kilsyth district an increase of 40 per cent., but as I said earlier, that is over and above a 40 per cent. increase that the previous SNP-controlled district council levied. Almost the moment that this Tory Government took power it got permission from the Secretary of State to do so. Strathkelvin district council will have a rent increase of 45 per cent.
I am sure that all those local authorities—they are all Labour-controlled because the people in my constituency are sick to the teeth of this Tory Government and they all voted for Labour-controlled councils at the last elections in May 1979—will do their utmost to keep rent increases far below the figures that I have suggested.

Mr. Ian Lang: rose—

Mr. Canavan: It is incumbent upon the Minister to give some indication to those councils as to the alternatives.

Mr. Lang: I thank the hon. Gentleman for his courtesy. He gave some interesting figures in relation to some district councils. Does he agree that the House should have the full picture, and would he not like to add that the Wigtown district council in my constituency would have to increase rents by only 11 per cent., the Stewartry district council would have to increase rents by only 2 per cent., and East Kilbride district council would have an assumed nil increase?

Mr. Canavan: I do not think that the hon. Member for Galloway (Mr. Lang) can compare the proportion of council houses in his constituency with the proportion of council houses in my constituency. I have four different housing authorities in my constituency and I am probably the only hon. Member who can say that. I have given the figures from my own constituency, which is typical, bearing in mind that in Scotland more than 50 per cent. of the people live in council housing. If there is anything untypical, it may be the proportion of council housing in the hon. Member's constituency, which certainly is not anywhere near the Scottish average.
Several Conservative Members have asked what would be a reasonable rent increase. If the Government are so centralised and so dictatorial that they are telling local authorities that the cash limit on wages should be only 6 per cent., why do they not at least give the local authorities the money so that they can limit the rent increases to 6 per cent? Surely that would be logical.
Combined with the Government's policy of a massive rent increase, we have the effects which are now beginning to be felt of the Tenants' Rights, Etc. (Scotland) Act 1980. That is the biggest possible misnomer, because it gives no extra rights to tenants. It is forcing local authorities to sell off their housing stock at a time when thousands of families are on the waiting list. It is a typical piece of doctrinaire Tory asset-stripping policy that is doing absolutely nothing either to build an additional house in Scotland or to see that the allocation of housing is done on a fair basis.
Now, as well as exerting pressure on the housing authorities, the Government are exerting pressure on the tenants. By means of their high rent policy, the Government are trying to force the tenants into a position in which they feel pressurised to buy their own house and go for a mortgage rather than continuing to pay excessively high rent.
As well as the new legislation, there is the massive reduction in capital allocation for new building programmes and improvements and modernisation programmes. Probably for the first time in the history of public sector housing in Scotland we are seeing a danger of a reduction taking place in the amount of public sector housing stock. As well as this reduction in capital expenditure—which means a virtual standstill for the house building programme—the Government are forcing local authorities to sell off the housing stock which already exists. This policy will have devastating effects not just on people in council houses but also on the people on the waiting list. It will have devastating effects on employment prospects in the construction industry, particularly in Scotland, where the industry is very dependnt on public sector housing contracts.
I should like to pick up a point that was made by the hon. Member for Argyll (Mr. MacKay). He seemed to be denigrating the record of certain Labour-controlled local authorities such as Glasgow. He did not seem to realise that Glasgow historically has had to implement housing policies under tremendous inherited difficulties and also difficulties imposed upon it by Tory Governments such as the present one.
I should like to point out to the hon. Member some statistics which his hon. Friend the Under-Secretary of State, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), gave in answer to my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen). These statistics are very relevant to the whole business of capital allocations and the need to encourage local authorities to improve their existing stock and to replace it by better housing stock. I do not think that the hon. Member for Argyll can hold his head up high when he looks at these statistics about the numbers and percentages of houses falling below the minimum tolerable standards. In Argyll, the figure is 17·6 per cent. That is an absolute disgrace. With the exception of Skye and Lochalsh district council, it is the worst in Scotland.
The hon. Member for Argyll was a member of that Argyll council.

Mr. John MacKay: Does not the hon. Gentleman agree that given a choice and despite the statistics, people prefer to live in Argyll than in Glasgow?

Mr. Canavan: Given a choice, people do not want to live in sub-standard houses in Argyll, or anywhere else.


The hon. Gentleman should be ashamed of himself, and ashamed to represent a constituency with the second worst record in Scotland. I repeat, 17·6 per cent. of houses are sub-standard. In Labour-controlled Glasgow, which inherited terrible social difficulties, the figure is only 10·4 per cent. In Aberdeen, which is also Labour-controlled, the figure is as small as 6·4 per cent. The hon. Gentleman should bear that in mind.

Mr. David Lambie: My hon. Friend has been very unfair to the hon. Member for Argyll (Mr. MacKay). Does not my hon. Friend realise that for the greater part of his life the hon. Gentleman has been a member of the Liberal Party and has stood as a Liberal candidate. He fought the Tories in Argyll as well as Tory landlords.

Several Hon. Members: rose—

Mr. Deputy Speaker: Order. The debate is about the housing support grant. It is not about who is a member of the Liberal Party.

Mr. Canavan: Given the hon. Gentleman's chequered political career, I should not be surprised if he joined Roy Jenkins next week. The order is a savage attack on the living standards of thousands of council tenants in Scotland. I hope that district councils, particularly Labour-controlled district councils, will use every means at their disposal to fight the Government's high rents policy. I hope that they will fight this policy to reduce living and housing standards. In addition, I hope that all my right hon. and hon. Friends—even some enlightened Tories—will vote against the order.

Mr. Russell Johnston: I shall not be as generous as the hon. Member for West Stirlingshire (Mr. Canavan) about giving way. The Government's policy, in terms of the cut in the housing grant and the guidelines for the rate fund contribution means that there will be arbitrary rent increases throughout Scotland. In Skye and Lochalsh rents will increase by 64 per cent. Skye is not well off. Those who live there do not generally earn high incomes. Again, in Lochaber, where the pulp mill has just been closed, there will be a 64 per cent. increase in the rent levels. Other areas in the Highlands will fare even worse.
In Western Isles the increase will be 66 per cent. and in Caithness it will be 74 per cent. ft is not enough for the Minister to say that there will be rent rebates. That does not take account of a generally low level of incomes. Nor does it take account of the fact that the increases occur arbitrarily. In all the districts of my constituency, including Inverness and Badenoch, the housing construction programme will be cut savagely. I have never had so many people coming to my clinic saying that they need a house but knowing that they will not get one. The SSHA programme of modernisation is being cut back and put off into the far distant future.
These late hour debates are seldom reflective, but they often throw into relief especially bad consequences of formulas devised by Governments. I hope that following the vote—the Whip system will ensure that there is a majority for the Government whatever arguments have been deployed—the Minister will go back and think about the consequences and the bad effects and take some action.

Mr. Rifkind: The hon. Member for Inverness (Mr. Johnston) suggested that the rent increases proposed by individual authorities were arbitrary and had no rational basis. The hon. Gentleman is incorrect in that assumption. The particular figure determined for each local authority is based on the minimum rent increase that would be required to ensure that there was no increase in real terms in the rate fund contribution compared with the figure used for the rate fund contribution last year. It is not an arbitrary figure. It is for that reason that there are significant differences between authorities.
The hon. Member for Dundee, West (Mr. Ross) made a passionate plea for a rent freeze in Dundee and implied that any increase of the type that the Government propose would be an intolerable burden on the people of Dundee. The hon. Gentleman should have pointed out—it should not be for me to point out to him—that, although the Scottish average of £2·32 exists, it is the case that in Dundee, because of the sensible policies of the previous Conservative Administration, a rent increase of only 99p is required to ensure a reasonable response.

Mr. Ernie Ross: The hon. Gentleman seeks to mislead the House. I suggested that even with a rent freeze in Dundee the rate fund contribution to the housing account would, at the end of the day, be only, the average of what the Secretary of State for Scotland proposes for rents in Scotland.

Mr. Rifkind: The hon. Gentleman has not checked his facts. There was no rent increase in Dundee last year under the Conservative administration because the authority was dealt with in such a responsible and sensible fashion that the resources and finances of the local authority enabled it not to make a rent increase at all. It is a meaningless proposition for the hon. Gentleman to suggest that following no rent increase last year a rent increase of 99p in the current year is excessive.
The hon. Member for West Stirlingshire (Mr. Canavan) put forward a similar passionate plea on behalf of his local authorities. He pointed out, without emphasising the point, that in the case of Cumbernauld and Kilsyth, because of the sensible rent increases imposed some time ago, the increase now required is only 96p, a relatively small amount. The hon. Gentleman chose to ignore that factor.
My hon. Friend the Member for Argyll (Mr. MacKay) asked for an assurance that if a further variation order is required the sum involved will be based on procedure applied in the past and that any changes due to interest rates and normal factors included in these matters will be taken into account. I am happy to give the assurance that this will be the policy we shall pursue. My hon. Friend also asked what was the rate fund contribution in various years to which he referred. In the current year, 1980–81, the figures budgeted by local authorities, significantly higher than the Government requested, amounted to £88 million. The figure for next year, based on the figure that is required to maintain, in real teens, the rate fund contribution compared with the sum proposed a year ago, is £62 million.
A number of basic inaccuracies were reflected in the observations of the hon. Member for Glasgow, Garscadden (Mr. Dewar). The hon. Gentleman started by saying that to use a single figure as an average per capita


rate fund contribution around the various authorities in Scotland was an illogical formula and an illogical procedure. If the hon. Gentleman thought that it was illogical, he might have pointed out that it was exactly the approach introduced by the previous Government when they introduced the housing support grant system. They used a per capita basis. They had decided, sensibly, that the contribution to the rate fund contribution should vary from local authority to local authority depending on the number of ratepayers and, therefore, their ability to contribute towards this matter.

Mr. Bruce Milan: That is absolute rubbish. Under the Labour Government there was never any question of applying a particular rate fund contribution without any discrimination at all to every local authority in Scotland. That simply did not happen. This is a completely new element which has been introduced by the Government this year. What is more, the Labour Government never at any time tried to force rent increases by saying that unless rents rose by figures which were laid down arbitrarily by the Government there would be a reduction in local authorities' housing capital allocations. That, too, is completely new. The Minister knows it, but, even more important, the local authorities know it, and they complained bitterly to us today about it.

Mr. Rifkind: I am not questioning that the link with capital allocations is a completely new policy. I am about to turn to that. But the right hon. Gentleman is quite wrong, because, if he had listened to his hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), he would know that the point made by his hon. Friend was that it was illogical to talk in terms of a per capita figure for establishing a rate fund contribution. As the right hon. Gentleman disagrees with that, he had better check his own practice when he was in Government.
The hon. Member for Garscadden spent most of his time attacking the linkage we have made between rent levels and capital allocation. We have made this linkage for a very simple reason. We were anxious to maintain the capital allocations that might be available to local authorities at the highest possible level. There is a maximum sum available for public expenditure on housing. In so far as local authorities failed last year to make reasonable rent increases and put the burden on the ratepayer, that has absorbed part of the funds available for housing expenditure in Scotland.
We could have responded in a crude and indiscriminate fashion. We could simply have made a reduction in the capital allocation for local authorities next year compared with this year in order to ensure that the total public expenditure on housing was maintained at the level that the Government felt appropriate. [Interruption.] I must ask the right hon. Member for Glasgow, Craigton (Mr. Millan) to stop muttering from a sedentary position—which is his normal contribution to these debates.

Mr. Millan: The present Government have brought the whole of housing in Scotland to ruination.

Mr. Rifkind: That was a particularly original contribution from the right hon. Gentleman.
I should like to continue explaining the system that we have applied. If we had not linked it with capital

allocation, the total sum available for capital expenditure would have had to be reduced accordingly. That would have been a crude and indiscriminate system, which would have made no difference between the local authorities that had responded sensibly and those that had failed to do so. Instead, we have chosen, quite rightly and without any apology whatsoever, to introduce a system that will enable a local authority ultimately to decide whether it wishes to give greater priority to its decision on rent, knowing that it will thereby lose its capital allocation, or, alternatively, whether it will make a reasonable decision on rents in order to preserve the capital allocation to which it would be entitled.
I say to the hon. Member for Garscadden that, if local authorities respond reasonably on rents, the capital sums available on their housing revenue accounts for the forthcoming year will be exactly the same in real terms as for the current year. That was the Government's objective. It will be entirely a matter for local authorities to decide whether that objective can be realised.

Mr. Dewar: The hon. Member said that the purpose was to encourage reasonable rent increases. Presumably, the carrot was that an authority would save something which otherwise would be cut off its housing capital allowance. To take Glasgow as an example, in order to save a penny over the lower figure, to get into the tapering tranche of the housing capital allowance at all, the rent increase would have to be above 50 per cent. Is that reasonable in Tory terms?

Mr. Rifkind: If we had not recognised Glasgow's special needs and applied an exact arithmetical formula, the provisional allocation to Glasgow would have been considerably less than the figure it has been given. Therefore, the hon. Gentleman cannot suggest that our attitude towards the city of Glasgow has been anything but eminently reasonable.
Opposition Members must come to terms with the fact that, if they wish to see capital expenditure on housing maintained in Scotland, the only way in which that can be done is by a responsible attitude on the part of local authorities towards rent decisions.
When the hon. Member for Garscadden concluded his oration with a passionate plea on behalf of the unemployed and the poor, he could at least have pointed out that the unemployed and the poor will not be paying these rent increases. He and his hon. Friends know that. They know, because it has been said numerous times, that one-quarter of tenants pay no rent and that another quarter pay a highly subsidised rent through the rent rebate system and will continue to do so.
If the hon. Gentleman is concerned with those people, he should realise when he refers to the unemployed that that is totally irrelevant to a rent system, because the vast majority of the unemployed will benefit from the rent rebate system and pay either no rent at all or a minimal rent. He is intelligent enough to know that. To introduce the subject into the debate can be considered only a deliberate desire to deceive the House into misunderstanding the effects of the order.
The Government are in no way ashamed of, and feel no need to apologise for, the order. It is a responsible order. It will enable local authorities to make a reasonable contribution to their capital spending and at the same time


will impose no intolerable burden upon the tenants whom they represent. We are proud of the order and commend it to the House.

Question put:—

The House divided: Ayes 269, Noes 219.

Division No. 50]
[00.00


AYES


Adley, Robert
Fell, Anthony


Aitken, Jonathan
Fenner, Mrs Peggy


Alexander, Richard
Fisher, Sir Nigel


Ancram, Michael
Fletcher, A (Ed'nb'gh N)


Arnold, Tom
Fletcher-Cooke, Charles


Atkins, Robert (Preston N)
Fowler, Rt Hon Norman


Atkinson, David (B'm'th, E)
Fox, Marcus


Baker, Kenneth (St. M'bone)
Fraser, Peter (South Angus)


Baker, Nicholas (N Dorset)
Fry, Peter


Banks, Robert
Gardiner, George (Reigate


Beaumont-Dark, Anthony
Gardner, Edward (S Fylde)


Bendall, Vivian
Garel-Jones, Tristan


Bennett, Sir Frederic (T'bay)
Glyn, Dr Alan


Benyon, Thomas (A'don)
Goodhart, Philip


Benyon, W. (Buckingham)
Goodlad, Alastair


Bevan, David Gilroy
Gow, Ian


Biggs-Davison, John
Gray, Hamish


Blackburn, John
Greenway, Harry


Blaker, Peter
Grieve, Percy


Body, Richard
Griffiths, E. (B'ySt. Edm'ds)


Bonsor, Sir Nicholas
Griffiths, Peter Portsm'th N)


Boscawen, Hon Robert
Grist, Ian


Bottomley, peter (W'wich W)
Grylls, Michael


Bowden, Andrew
Gummer, John Selwyn


Boyson, Dr Rhodes
Hamilton, Hon A.


Braine, sir Bernard
Hamilton, Michael (Salisbury)


Bright, Graham
Hampson, Dr Keith


Brinton, Leon
Hannam, John


Brittan, Leon
Haselhurst, Alan


Brooke, Hon Peter
Havers, Rt Hon Sir Michael


Brotherton, Michael
Hawkins, Paul


Brown, M. (Brigg and Scun)
Hawksley, Warren


Browne, John (Winchester)
Hayhoe, Barney


Bruce-Gardyne, John
Heddle, John


Bryan, Sir Paul
Henderson, Barry


Buck, Antony
Heseltine, Rt Hon Michael


Bulmer, Esmond
Hicks, Robert


Burden, Sir Frederick
Higgins, Rt Hon Terence L.


Butcher, John
Hill, James


Carlisle, John (Luton West)
Hogg, Hon Douglas (Gr'th'm)


Carlisle, Kenneth (Lincoln)
Holland, Philip (Carlton)


Carlisle, Rt Hon M. (R'c'n)
Hooson, Tom


Channon, Rt Hon. Paul
Hordern, peter


Chapman, Sydney
Howell, Ralph (N Norfolk)


Churchill, W. S.
Hunt, David (Wirral,)


Clark, Hon A. (Plym'th, S'n)
Hunt, John (Revensbourne)


Clark, Sir W. (Croydon S)
Hurd, Hon Douglas


Clarke, Kenneth (Rushcliffe)
Jenkin, Rt Hon Patrick


Clegg, Sir Walter
Jessel, Toby


Cockeram, Eric
Johnson Smith, Geoffrey


Colvin, Michael
Jopling, Rt Hon Michael


Cope, John
Kaberry, Sir Donald


Corrie, John
Kellett-Bowman, Mrs Elaine


Costain, Sir Albert
Kershaw, Anthony


Cranborne, Viscount
King, Rt Hon Tom


Critchley, Julian
Kitson, Sir Timothy


Crouch, David
Knight, Mrs Jill


Dean, Paul (North Somerset)
Knox, David


Dickens, Geoffrey
Lamont, Norman


Dorrell, Stephen
Lang, Ian


Dover, Denshore
Langford-Holt, Sir John


Dunn, Robert (Dartford)
Latham, Michael


Durant, Tony
Lawson, Nigel


Dykes, Hugh
Lee, John


Edwards, Rt Hon N. (P'broke)
Lennox-Boyd, Hon Mark


Eggar, Tim
Lester Jim (Beeston)


Elliott, Sir William
Lewis, Kenneth (Rutland)


Emery, Peter
Lloyd, Peter (Fareham)


Eyre, Reginald
Loveridge, John


Fairgrieve, Russell
Luce, Richard


Faith, Mrs Sheila
Lyell, Nicholas


Farr, John
McCrindle, Robert





Macfarlane, Neil
Rossi, Hugh


MacGregor, John
Rost, Peter


MacKay, John (Argyll)
Royle, Sir Anthony


McNair-Wilson, M. (N bury)
Sainsbury, Hon Timothy


McNair-Wilson, P. (New F'st)
Scott, Nicholas


McQuarrie, Albert
Shaw, Giles (Pudsey)


Madel, David
Shaw, Michael (Scarborough)


Major, John
Shelton, William (Streatham)


Marland, Paul
Shepherd, Colin (Hereford)


Marlow, Tony
Shersby, Michael


Marshall Michael (Arundel)
Silvester, Fred


Mather, Carol
Sims, Roger


Maude, Rt Hon Angus
Skeet, T. H. H.


Mawby, Ray
Smith, Dudley


Mawhinney, Dr Brian
Spence, John


Maxwell-Hyslop, Robin
Spicer, Jim (West Dorset)


Meyer, Sir Anthony
Spicer, Michael (S Worcs)


Miller, Hal (B'grove)
Sproat, Ian


Mills, Iain (Meriden)
Squire, Robin


Mills, Peter (West Devon)
Stanbrook, Ivor


Miscampbell, Norman
Stanley, John


Mitchell, David (Basingstoke)
Steen, Anthony


Moate, Roger
Stevens, Martin


Monro, Hector
Stewart, Ian (Hitchin)


Montgomery, Fergus
Stewart, A. (E Renfrewshire)


Moore, John
Stokes, John


Morris, M. (N'hampton S)
Stradling Thomas, J.


Morrison, Hon C. (Devizes)
Taylor, Teddy (S'end E)


Mudd, David
Temple-Morris, Peter


Murphy, Christopher
Thatcher, Rt Hon Mrs M.


Myles, David
Thomas, Rt Hon Peter


Neale, Gerrard
Thomas, Donald


Needham, Richard
Thorne, Neil (Ilford South)


Nelson, Anthony
Thornton, Malcolm


Neubert, Michael
Townend, John (Bridlington)


Newton, Tony
Townsend, Cyril D, (B'heath)


Nott, Rt Hon John
Trippier, David


Onslow, Cranley
Trotter, Neville


Oppenheim, Rt Hon Mrs S.
van Straubenzee, W. R.


Osborn, John
Vaughan, Peter


Page, John (Harrow, West)
Viggers, Peter


Page, Rt Hon Sir G. (Crosby)
Waddington, David


Page, Richard (SW Herts)
Wakeham, John


Parris, Matthew
Waldegrave, Hon William


Patten, Christopher (Bath)
Walker, Rt Hon P. (W'cester)


Patten, John (Oxford)
Walker, B. (Perth)


Pattie, Geoffrey
Waller, Gary


Pawsey, James
Ward, John


Pink, R. Bonner
Warren, Kenneth


Pollock, Alexander
Watson, John


Porter, Barry
Wells, John (Maidstone)


Prentice, Rt Hon Reg
Wells, Bowen


Price, Sir David (Eastleigh)
Wheeler, John


Prior, Rt Hon James
Whitney, Raymond


Proctor, K Harvey
Wickenden, Keith


Raison, Timothy
Wiggin, Jerry


Rathbone, Tim
Wilkinson, John


Rees, Peter (Dover and Deal)
Williams, D. (Montgomery)


Renton, Tim
Wolfson, Mark


Rhodes James, Robert
Young, Sir George (Acton)


Rhys Williams, Sir Brandon
Younger, Rt Hon George


Rifkind, Malcolm
Tellers for the Ayes:


Roberts, M. (Cardiff NW)
Mr. Spencer Le Marchant


Roberts, Wyn (Conway)
and Mr. Anthony Berry




NOES


Abse, Leo
Bray, Dr Jeremy


Adams, Allen
Brown, Hugh D. (Provan)


Allaun, Frank
Brown, Ron (E'burugh, Leith)


Alton, David
Brown, Ronald W. (H'ckn'y S)


Anderson, Donald
Buchan, Norman


Archer, Rt Hon Peter
Callaghan, Jim (Midd't n &amp; P)


Armstrong, Rt Hon Ernest
Campbell, Ian


Atkinson, N. (H'gey,)
Canavan, Dennis


Barnett, Guy (Greenwich)
Cant, R. B.


Beith, A. J.
Carmichael, Neil


Bennett, Andrew (St'kp't N)
Carter-Jones, Lewis


Booth, Rt Hon Albert
Cartwright, John


Boothroyd, Miss Betty
Clark, Dr David (S Shields)


Bradley, Tom
Cocks, Rt Hon M (B'stol S






Cohen, Stanley
Lambie, David


Coleman, Donald
Lamborn, Harry


Conlan, Bernard
Lamond, James


Cook, Robin F.
Leadbitter, Ted


Cowans, Harry
Leighton, Ronald


Craigen, J. M.
Lewis, Arthur (N'ham NW)


Crowther, J. S.
Lewis, Ron (Carlisle)


Cryer, Bob
Litherland, Robert


Cunliffe, Lawrence
Lofthouse, Geoffrey


Cunningham, G. (Islington S)
McDonald, Dr Oonagh


Cunningham, Dr J. (W'h'n)
McElhone, Frank


Dalyell, Tam
McGuire, Michael (Ince)


Davies, Rt Hon Denzil (L'Ili)
McKay, Allen (Penistone)


Davis, Clinton (Hackney C)
McKelvey, William


Davis, T. (B'ham, Stechf'd)
Maclennan, Robert


Deakins, Eric
McNally, Thomas


Dewar, Donald
McNamara, Kevin


Dixon, Donald
McTaggart, Robert


Dobson, Frank
McWilliam, John


Dormand, Jack
Magee, Bryan


Douglas, Dick
Marks, Kenneth


Douglas-Mann, Bruce
Marshall, Dr Edmund (Goole)


Dubs, Alfred
Marshall, Jim (Leicester S)


Dunnett, Jack
Martin, M (G'gow S'burn)


Dunwoody, Hon Mrs G.
Mason, Rt Hon Roy


Eadie, Alex
Maxton, John


Eastham, Ken
Meacher, Michael


Ellis, R. (NE D'bysh're)
Mikardo, Ian


Ellis, Tom (Wrexham)
Millan, At Hon Bruce


English, Michael
Miller, Dr M. S. (E Kilbride)


Evans, Ioan (Aberdare)
Mitchell, Austin (Grimsby)


Evans, John (Newton)
Morris, Rt Hon C. (O'shaw)


Ewing, Harry
Morris, Rt Hon J. (Aberavon)


Faulds, Andrew
Moyle, Rt Hon Roland


Field, Frank
Newens, Stanley


Flannery, Martin
Oakes, Rt Hon Gordon


Fletcher, Ted (Darlington)
Ogden, Eric


Ford, Ben
O'Halloran, Michael


Forrester, John
O'Neill, Martin


Foster, Derek
Orme, Rt Hon Stanley


Foulkes, George
Palmer, Arthur


Fraser, J. (Lamb'th, N'w'd)
Park, George


Freeson, Rt Hon Reginald
Parker, John


Garrett, John (Norwich S)
Parry, Robert


Garrett, W. E. (Wallsend)
Pavitt, Laurie


George, Bruce
Penhaligon, David


Gilbert, Rt Hon Dr John
Powell, Raymond (Ogmore)


Graham, Ted
Prescott, John


Grant, George (Morpeth)
Price, C. (Lewisham W)


Grant, John (Islington C)
Race, Reg


Hamilton, James (Bothwell)
Radice, Giles


Hamilton, W. W. (C'tral Fife)
Rees, Rt Hon M (Leeds S)


Hardy, Peter
Richardson, Jo


Harrison, Rt Hon Walter
Roberts, Allan (Bootle)


Hart, Rt Hon Dame Judith
Roberts, Ernest (Hackney N)


Hattersley, Rt Hon Roy
Roberts, Gwilym (Cannock)


Haynes, Frank
Robertson, George


Healey, Rt Hon Denis
Robinson, G. (Coventry NW)


Heffer, Eric S.
Rooker, J. W.


Hogg, N. (E Dunb't'nshire)
Roper, John


Holland, S. (L'b'th, Vauxh'll)
Ross, Ernest (Dundee West)


Home Robertson, John
Ross, Stephen (Isle of Wight)


Homewood, William
Rowlands, Ted


Hooley, Frank
Sever, John


Horam, John
Sheerman, Barry


Howell, Rt Hon D.
Sheldon, Rt Hon R.


Howells, Geraint
Shore, Rt Hon Peter


Hudson Davies, Gwilym E.
Silkin, Rt Hon J. (Deptford)


Hughes, Mark (Durham)
Silkin, Rt Hon S. C. (Dulwich)


Hughes, Robert (Aberdeen N)
Silverman, Julius


Hughes, Roy (Newport)
Skinner, Dennis


John, Brynmor
Smith, Rt Hon J. (N Lanark)


Johnson, James (Hull West)
Soley, Clive


Johnston, Russell (Inverness)
Spearing, Nigel


Jones, Rt Hon Alec (Rh'dda)
Spriggs, Leslie


Jones, Barry (East Flint)
Stallard, A. W.


Jones, Dan (Burnley)
Steel, Rt Hon David


Kaufman, Rt Hon Gerald
Stewart, Rt Hon D. (W Isles)


Kerr, Russell
Stoddart, David


Kilroy-Silk, Robert
Stott, Roger





Strang, Gavin
White, Frank R.


Straw, Jack
White, J. (G'gow Pollok)


Summerskill, Hon Dr Shirley
Whitehead, Phillip


Taylor, Mrs Ann (Bolton W)
Whitlock, William


Thomas, Jeffrey (Abertillery)
Williams, Rt. Hon A. (S'sea W)


Thomas, Mike (Newcastle E)
Wilson, Gordon (Dundee E)


Thomas, Dr R. (Carmarthen)
Wilson, Rt Hon Sir H. (H'ton)


Thorne, Stan (Preston South)
Wilson, William (C'try SE)


Tilley, John
Winnick, David


Tinn, James
Woodall, Kenneth


Torney, Tom
Woolmer, Kenneth


Urwin, Rt Hon Tom
Wrigglesworth, Ian


Varley, Rt Hon Eric G.
Young, David (Bolton E)


Wainwright, E. (Dearne V)
Tellers for the Noes:


Walker, Rt Hon H. (D'caster)
Mr. Hugh McCartney and


Watkins, David
Mr. George Morton


Welsh, Michael

Question accordingly agreed to.

Resolved,
That the draft Housing Support Grant (Scotland) Order 1981, which was laid before this House on 12 January, be approved.

Resolved,
That the draft Housing Support Grant (Scotland) Variation Order 1981, which was laid before this House on 12 January, be approved.
That the draft Housing Support Grant (Scotland) Variation (No. 2) Order 1981, which was laid before this House on 12 January, be approved.—[Mr. Rifkind.]

Orders of the Day — Criminal Procedure (Royal Commission's Report)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]

Mr. John Ryman: I wish to raise the question of the report of the Royal Commission on criminal procedure, under the chairmanship of Sir Cyril Philips, which reported in January. I am indebted to the Minister of State, Home Office, for being here to reply to the debate and to express the views of the Government on this subject. The report has only recently been published. There has not yet been sufficient time to absorb all the recommendations, or for any public or parliamentary debate to take place. I believe that this is the first occasion for the House to have the opportunity, albeit a short one, to consider these important recommendations.
I wish to take this opportunity to congratulate the commission on its recommendations, on its hard work, and on the painstaking way in which it accumulated a mass of evidence and gave careful consideration to a difficult subject. I believe that it is the first time that there has been a comprehensive review of the history and practice of the investigation of offences and the prosecution of offenders.
In view of the size of the subject, I ask only: what is the Government's reaction to the report; may we have an opportunity to debate the report in the near future; and what is the likely cost of implementing some of the recommendations in the report?
The thread that appears to run through the report is the difficult balance that has to be achieved between strengthening the powers of the police to prevent crime, detect, apprehend and successfully prosecute criminals and protecting civil liberties and the rights of a person in custody.
On the whole, that difficult question has been sensibly and well analysed by the commission, and I suggest that a fair balance has been achieved. The commission has


undoubtedly made a large number of recommendations, on the one hand, to strengthen the powers of police officers—for example, in respect of searches of persons, vehicles and so on—and, on the other hand, to increase the rights and protection afforded to persons detained in police custody.
I suggest that the criterion set in chapter 5—
Summary and conclusions of Part I: the investigation of offences"—
is fair. Basically, the Commission recommends that, in order for the public to have confidence in the police, the criterion should be one of fairness, openness and workability as a means of evaluating existing procedures and proposals for change.
The Government must grasp the nettle and decide whether, in effect, to introduce legislation in due course to increase police powers. I think that some of the comments in the press, when the report was originally published, were extremely irresponsible. I suggest that the powers of the police should be substantially increased in respect of matters such as search. If the police are to perform their task properly, they must have greater powers.
On the other hand, I agree with the tenor of the commission's recommendations that if we give the police greater powers, at the same time we must increase protection for the individual who may be taken into custody to ensure that he is not kept in custody any longer than is absolutely essential.
To this end the commission has recommended that an outside force should exist to supervise how long a person can be kept in police custody either by being brought before a magistrate within a specified period or by ensuring that a solicitor visits the detained person. I think that is a sensible compromise. The commission obviously considered whether somebody should be in a police station to keep watch on what happens but rightly rejected that proposal as being unrealistic.
The commission is to be congratulated on rejecting a number of other unrealistic and distasteful proposals—for example, the mass finger printing of the whole population.
I ask the Minister to deal wih a number of specific matters when he replies to the debate. First, will the government consider embarking on consultations with the legal profession and other interested bodies regarding the implementation of the recommendations set out in chapter 9 relating to the prosecution of offenders? Those proposals concern the legal profession and the organisation of the courts. Could these be implemented without great public expense?
Secondly, will the Government consider urgently implementing the proposals to improve the system whereby records of police questioning are kept, particularly in relation to the phased introduction of tape recorders for interviews? That is urgent because there appears to be agreement on all sides that the present system is unsatisfactory and that something must be done. The sooner something is done the more helpful it will be.
Thirdly, will the Government consider asking the Law Commission to examine the judges rules and the suggested amendment to them by the introduction of a code of practice for regulation of interviews? The Commission recommends that and that a breach of the rules should not render any evidence adduced in breach of those rules as inadmissible but that the breach should go only to the weight of the evidence. Will the Government consider

referring that matter to the Law Commission in order to obtain the Commission's views on the practicability of introducing legislation? It is unsatisfactory that, if evidence is obtained in breach of certain rules, whether it be the judges rules, or a code of practice, nevertheless the evidence is admitted and the jury is simply directed that it should pay less attention to that evidence or that it goes to weight of evidence rather than admissibility.
A number of other proposals are sensible and capable of implementation soon. Many other recommendations would take much longer to consider and require much consultation.
I do not dwell further on the subject because time is short. The Minister will have much to say about the Government's views. However, I have several questions to ask. Do the Government—and I suggest that they should—in general terms, welcome the Commissions's report? Do they agree with the tenor of the report and believe that it strikes a fair balance between increasing the powers of the police and increasing the safeguards of people in custody?
Will the Government undertake to begin the detailed process of consultation as quickly as possible with the legal professions and other interested parties so that specific recommendations can be implemented as soon as possible? Will the Minister indicate when there will be an opportunity for a full parliamentary debate on the topic? Will he consider issuing a discussion paper setting out the Government's views of the recommendations?
The report is important. It was published only a year or so after the Royal Commission's report on legal services. The legal profession has already taken steps to implement that report and is to be congratulated. The profession has taken steps to improve criminal procedure in the courts. I speak, for example, of the question of summons for directions in criminal cases which saves an enormous amount of time and public money. Another example is the question of admissions under section 10, which saves the time of witnesses. That is a further step in a healthy procedure of improving the quality of justice. I ask the Minister to give the issue urgent consideration.

Mr. George Cunningham: My hon. Friend the Member for Blyth (Mr. Ryman) and the Minister have kindly allowed me a minute in the middle of the debate, and I want to use it only to put one point to the Minister.
The question is how the House will deal with the consideration of this important and valuable report. It would be possible for the Government to delay until they had made up their own mind on all or most of the recommendations in the report. I suggest to the Minister that that would not be a desirable way of proceeding and that it would be better—after the Government have had time to digest the proposals, of course—for us to have a trot-over-the-ground-type debate on either an Adjournment motion or on a take-note motion, so that before the Government finally make up their own mind on the recommendations that have been made they can have the benefit of hearing the views of as many Members as possible.

The Minister of State, Home Office (Mr. Patrick Mayhew): I congratulate the hon. Member for Blyth (Mr.


Ryman) upon his choice of subject and on securing our Adjournment debate tonight. I entirely agree with him when, in his closing sentences, he described the report of the Royal Commission on criminal procedure as a most important report and one which takes its place in a series of reports, recommendations and measures which the legal profession has itself initiated, with a view to bringing its procedures up to date and providing a better service for those who depend upon the law for their rights.
The questions that the hon. Gentleman asks are very relevant. The Government indeed want to be told what the profession and all other interested parties think about this very comprehensive report. As my right hon. Friend the Home Secretary said when the report was published, it is our hope that a very wide-ranging body of opinion will make itself felt, so that the Government can come to their conclusions.
I hear what the hon. Member for Islington, South and Finsbury (Mr. Cunningham) has asked me. These matters do not rest with me, but I would judge it very helpful for the Government to have at an appropriate time the kind of debate that he suggests, as part of the process by which they can be informed of general views about the contents of the report.
This represents the first opportunity that the House has had to debate and consider the Royal Commission's report. It must be a very brief debate, naturally, a somewhat superficial one, but I have carefully noted the points that the hon. Member for Blyth has made. I know that he will not expect me to give a full exposition of the Government's response now. Indeed, it would be quite wrong to do so until we have had the benefit of other people's views. But I entirely share what I take to be the hon. Gentleman's wish to devote this occasion to drawing attention to some of the main features of the commission's report, at which we shall all, I hope, be looking in closer detail in the coming months, and to suggest some of the questions that I believe we shall have to ask ourselves about it. The House may well decide that it wishes to have a debate.
Even before the report was published, speculation on its possible contents provoked some comment and criticism. I rather agree with what the hon. Gentleman said about some of the instant criticism that greeted the report's publication. Any sensible consideration of the report leads one to agree with his description of it as striking a fair balance between the opposing interests—those of the public in seeing that the police are adequately equipped for the tasks that we place upon them and those of seeing that the liberties of the subject are not unnecessarily constrained. It was astonishing to find campaigns against the report being launched before hon. Members could have had time to read it, let alone to meditate on its contents.
The commission observed that this was the first thorough-going review of criminal procedure for more than a century. As it stands, the law is often confused and uncertain. It has developed over a long period without any notable logic or consistency in some respects. There are many anomalies. Much of it was originally enacted in social circumstances quite different from those of today. For example, existing powers to stop and search vehicles date from a time before the invention of the internal combustion engine and the vast social changes that have accompanied it.
Both the police and the suspect are hampered by this state of affairs—the police because they may be obliged to operate in areas of doubtful or ambiguous legal authority and the suspect because his rights at any particular moment may be so unclear that he lacks any prope or practical legal protection.
Clearly, therefore, there was a case for rationalisation. To do that for its own sake would be a very doubtful reason for the establishment of a Royal Commission. It reminds us that in the period before it was set up there had been a good deal of concern about the operation of police powers and procedures—the eleventh report of the Criminal Law Revision Committee on evidence, the Confait case and so on. It was necessary, therefore, to look at the way in which suspects were brought to trial to ensure that justice was done and seen to be done.
Whatever view one takes of its recommendations, including, for example, the point to which the hon. Member referred—the consideration which the commission gave to tape recording police interviews, for which thereis, in my opinion, much to be said, although, equally, there are powerful considerations against it—the commission is to be congratulated on rising to this challenge. Its report is very full. I should like to associate myself with the tribute that the hon. Member very properly paid to it.
The report covers every aspect of pre-trial procedures, from arrest to trial, dealing also with powers of search, bringing cases to trial and the possible organisation of a new prosecuting system. In pursuing its arguments, the commission makes use of a series of specially conducted research studies, all of which have been published separately. The report is complemented by a companion volume setting out in a useful form a digest of the present arrangements. In the same way as the commission evidently saw its recommendations, whether on police powers or the prosecution process as interrelated, so I am sure the commission would hope that its report would be read in conjunction with the research and law and procedure volumes. I commend them to hon. Members because they are, like the report, lively and readable, which, again, distinguishes this report from many others.
The hon. Member asked whether the Government would consult the Bar, in particular on the proposals relating to prosecutions in chapter 9. We very much hope that all who prosecute, prosecuting solicitors and prosecuting members of the Bar, as well as those who defend, will give us the benefit of their views on those topics.
When the Royal Commission was established, the then Prime Minister referred to the balance which was to be struck
between the interests of the whole community and the rights and liberties of the individual citizens.
The commission has adopted this concept of a fundamental balance and it provides the foundation of its work. It observes that debate tends to be polarised between those to whom the interests of justice are paramount and those with an absolute belief in the rights of the suspect or individual members of the public.
To some extent, the commission continues, it is possible to reconcile these points of view by balancing any increase in the powers of the police with compensating safeguards in the rights of the suspect. But the commission did not find this approach universally helpful. In many instances, the commission found that views were being


advanced in areas in which there was a good deal of ignorance about the effects of existing procedures, and it was here that research had a vital part to play. It was not just a question of arbitrating between two extremes.
Here I might interpose that I have carefully noted what the hon. Gentleman said about asking the Law Commission to look at the proposals relating to the judges' rules. We shall certainly take that proposal into account. I have heard what the hon. Member said about whether it is just for evidence that has been obtained in breach of the judges' rules, or whatever code of practice might replace them, to be heard and whether that should be adbmissible. At the moment, there is a discretion, as the hon. Gentleman knows, for a judge to determine whether to admit the timed note—the point that he makes in that regard.
In putting forward its recommendations, the commission strove to maintain the balance to which the then Prime Minister referred. There have been those who have argued that it is not for a Royal Commission to deal with the balance but to deal only with the questions which need to be resolved before the balance can be struck. It may help here to repeat the commission's words that
It is for Parliament to decide how the fundamental balance in pre-trial procedures is to be defined and maintained".
That is from paragraph 10.13. Again, the commission says:
Our proposal for regulating in a comprehensive statutory framework arrangements for the investigation of offences and the prosecution of offenders affirms that Parliament has the duty of striking the fundamental balance and of keeping it under regular review.
That is paragraph 10.16. I do not think the commission could have been more explicit in setting down the exact limitation of its responsibilities and in reminding this House of ours in reading the report and taking stock of its arguments.
The report is in two parts, dealing respectively with the investigation and the prosecution of offences, and it is on the former that argument so far has tended to concentrate. If implemented, the commission's proposals would cut through the haphazard entanglements of existing procedures which I have already mentioned and replace them with a quite new procedure in which the respective positions of the police and the suspect would be clearly and systematically defined for the first time. Existing powers of stop and search would be placed on a single footing. The powers of arrest without warrant, which at present derive with no consistency from a number of different statutes, would be similarly brought into line. Clear limitations would be placed on the powers of the police to detain after arrest. The procedures contained in the judges' rules would be brought up to date and given statutory force, and so on.
Some critics have been quick to select and condemn these and other recommendations as unwarrantable extensions of police powers. But I wonder whether this does justice to either the commission's intentions or what, on closer inspection, it actually says. Is it enough, for example, to compare such recommendations with the existing arrangements without setting them in the wider context of the commission's proposals as a whole?
It is true, for example, that in the commission's system the police would have wider powers of arrest without warrant than at present. The existing position is that there is a power of arrest for any offence punishable with at least five years' imprisonment and, in addition, for a number

of other offences. Under the commission's proposals, this would be extended to any imprisonable offence. But the commission argues that, since it also proposes that a suspect should not be detained after arrest except in carefully defined circumstances—rather like the circumstances in which a person may be refused bail under the Bail Act—the extension of powers of arrest without warrant would not in fact lead to their wider use.
The commission proposes that there should be a code of practice for the regulation of interviews. The criticism has been made that the commission does not go on to propose—apart from certain limited and rather extreme circumstances—that evidence put forward at the trial in breach of the code of practice should be made inadmissible. Instead, the commission believes that the court should merely be empowered to make an assessment of the reliability of such evidence.
It should be emphasised that this recommendation—with which I do not for the moment record my agreement or dissent—does not reflect any degree of satisfaction with the existing state of affairs. But, after a careful study of the jurisdictions in which an "exclusionary" rule was practised, the commission came to the conclusion that it could not recommend it. If introduced in this country, it maintains, it could only
give rise to an increase of disputes about the admissibility of evidence",
resulting in
an increase in court time spent on matters which are not concerned with the innocence or guilt of the accused".
And this
would risk a diminution of public respect for the institutions of criminal justice".
That is set out in paragraph 4·128.
I say this not by way of defending—I do not think they need defending—the commission's recommendations. That is not my business this morning. I wish merely to elucidate its approach to the problem.
I set out at least two of the ways in which the Government will wish to address themselves to the first part of the report. First, there is the question of balance. We should need to make sure that in any new scheme of pre-trial procedure the power of the police would be matched by adequate safeguards for the suspect. Secondly, we shall need to be satisfied that the available information really supports any changes that are contemplated in present arrangements. Crucial recommendations, including those on the admissibility of evidence, which I have just mentioned, on the right of silence and on the tape-recording of interviews, depend on an assessment of existing procedures and of research material, on which we shall have to take a view, together with the opinions of those who we hope will inform us, before taking a decision on the commission's proposals themselves.
I find that the second part of the report has been much less widely discussed. I hope that this will be put right in the coming months, because the questions at issue in the second part are arguably at least as important as those in the first. Who should take charge of the prosecution of offences? Should it be the police, as it is at present, or should there be a new prosecuting authority independent of the police? What should be the role of the police prosecuting solicitor's departments, and upon what criteria should they or the new authorities operate? Here the


commission seems to have left some of its recommendations perhaps open-ended, partly, no doubt, because the problems are less concrete and there is, accordingly, more room for manoeuvre on points of detail.
At present, the responsibility for the police decision to prosecute generally speaking rests with the chief constable concerned. Under the commission's proposals, the Crown prosecutor would be accountable in terms of management to what is at present the local police authority, but his prosecution policy would be accountable to either the Home Secretary or the Attorney-General, who is in turn accountable to Parliament. The choice of one or the other of these raises intriguing constitutional questions which we cannot enter upon tonight.
Any movement in the direction suggested by the commission on prosecutions would have unavoidable and direct public expenditure implications. The extension as a first step of prosecuting solicitor's departments to all police areas and the creation of a prosecution inspectorate cannot be done without increases in public expenditure, increases which we should have to measure very carefully against possible benefits.
These, then, are some of the questions to which the Government will be addressing themselves in future months. In our consideration of the report, we shall, of course, be anxious to take into account, as I have said, the comments of everyone concerned with the subject, and, of

course, the comments and opinions of the House. We attach high value to a full public discussion of the commission's proposals. Indeed, anything less would not do them justice. So I welcome this debate in that spirit.
In conclusion, I refer to the hon. Gentleman's last question as to whether the Government welcome the report. Yes, indeed, we do, and wholeheartedly. I take this opportunity to repeat once again our thanks to the commission and its chairman, Sir Cyril Philips. At a time when some have sought to discredit the role of the Royal Commission in the formulation of public policy, this Royal Commission has demonstrated how such a body can bring fresh insights to what have been found to be intractable problems. In its painstaking analysis of arguments, its imaginative use of research and the comprehensive scope of its recommendations, no one who discusses criminal procedure in future years will be able to dismiss the commission's work.
I give an assurance that the Government will be looking at the commission's findings in the same reasoned and constructive spirit as they have been put forward. We very much hope that this will be an ambition which we can all share and act upon so that we can as a community create a new and enduring balance in a vital area of our criminal law.

Question put and agreed to.

Adjourned accordingly at seven minutes past Two o' clock.